Correlation Between South Pacific and Ucore Rare

Can any of the company-specific risk be diversified away by investing in both South Pacific 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 South Pacific and Ucore Rare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between South Pacific Metals and Ucore Rare Metals, you can compare the effects of market volatilities on South Pacific 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 South Pacific with a short position of Ucore Rare. Check out your portfolio center. Please also check ongoing floating volatility patterns of South Pacific and Ucore Rare.

Diversification Opportunities for South Pacific and Ucore Rare

-0.46

Correlation Coefficient

South Pacific  Ucore Rare

Very good diversification

The 3 months correlation between South and Ucore is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding South Pacific Metals 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 South Pacific 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 South Pacific Metals 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 South Pacific i.e., South Pacific and Ucore Rare go up and down completely randomly.

Pair Corralation between South Pacific and Ucore Rare

Assuming the 90 days trading horizon South Pacific Metals is expected to under-perform the Ucore Rare. But the stock apears to be less risky and, when comparing its historical volatility, South Pacific Metals is 1.24 times less risky than Ucore Rare. The stock trades about -0.11 of its potential returns per unit of risk. The Ucore Rare Metals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  60.00  in Ucore Rare Metals on September 29, 2024 and sell it today you would earn a total of  1.00  from holding Ucore Rare Metals or generate 1.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

South Pacific Metals  vs.  Ucore Rare Metals

South Pacific Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days South Pacific Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Ucore Rare Metals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ucore Rare Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ucore Rare showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with South Pacific and Ucore Rare

The main advantage of trading using opposite South Pacific and Ucore Rare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South Pacific 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 South Pacific Metals 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.