Correlation Between Rare Element and Ucore Rare

Can any of the company-specific risk be diversified away by investing in both Rare Element and Ucore Rare at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Rare Element and Ucore Rare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rare Element Resources and Ucore Rare Metals, you can compare the effects of market volatilities on Rare Element and Ucore Rare and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Rare Element with a short position of Ucore Rare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rare Element and Ucore Rare.

Diversification Opportunities for Rare Element and Ucore Rare

0.29

Correlation Coefficient

Rare Element  Ucore Rare

Modest diversification

The 3 months correlation between Rare and Ucore is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Rare Element Resources and Ucore Rare Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ucore Rare Metals and Rare Element is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Rare Element Resources are associated (or correlated) with Ucore Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ucore Rare Metals has no effect on the direction of Rare Element i.e., Rare Element and Ucore Rare go up and down completely randomly.

Pair Corralation between Rare Element and Ucore Rare

Assuming the 90 days horizon Rare Element Resources is expected to generate 1.78 times more return on investment than Ucore Rare. However, Rare Element is 1.78 times more volatile than Ucore Rare Metals. It trades about 0.07 of its potential returns per unit of risk. Ucore Rare Metals is currently generating about 0.01 per unit of risk. If you would invest  41.00  in Rare Element Resources on September 5, 2024 and sell it today you would earn a total of  22.00  from holding Rare Element Resources or generate 53.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	30.57%
Values	Daily Returns

Rare Element Resources  vs.  Ucore Rare Metals

Rare Element Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rare Element Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Rare Element is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Ucore Rare Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ucore Rare Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ucore Rare is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Rare Element and Ucore Rare

The main advantage of trading using opposite Rare Element and Ucore Rare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rare Element position performs unexpectedly, Ucore Rare can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Ucore Rare will offset losses from the drop in Ucore Rare's long position.

The idea behind Rare Element Resources and Ucore Rare Metals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.