Correlation Between Syrah Resources and Lynas Rare

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

By analyzing existing cross correlation between Syrah Resources Limited and Lynas Rare Earths, you can compare the effects of market volatilities on Syrah Resources and Lynas 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 Syrah Resources with a short position of Lynas Rare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Syrah Resources and Lynas Rare.

Diversification Opportunities for Syrah Resources and Lynas Rare

0.75

Correlation Coefficient

Syrah Resources  Lynas Rare

Poor diversification

The 3 months correlation between Syrah and Lynas is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Syrah Resources Limited and Lynas Rare Earths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lynas Rare Earths and Syrah Resources 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 Syrah Resources Limited are associated (or correlated) with Lynas Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lynas Rare Earths has no effect on the direction of Syrah Resources i.e., Syrah Resources and Lynas Rare go up and down completely randomly.

Pair Corralation between Syrah Resources and Lynas Rare

Assuming the 90 days horizon Syrah Resources Limited is expected to generate 3.54 times more return on investment than Lynas Rare. However, Syrah Resources is 3.54 times more volatile than Lynas Rare Earths. It trades about 0.04 of its potential returns per unit of risk. Lynas Rare Earths is currently generating about 0.03 per unit of risk. If you would invest  15.00  in Syrah Resources Limited on September 4, 2024 and sell it today you would earn a total of  0.00  from holding Syrah Resources Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Syrah Resources Limited  vs.  Lynas Rare Earths

Syrah Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Syrah Resources Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Syrah Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Lynas Rare Earths

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lynas Rare Earths are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Lynas Rare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Syrah Resources and Lynas Rare

The main advantage of trading using opposite Syrah Resources and Lynas Rare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Syrah Resources position performs unexpectedly, Lynas 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 Lynas Rare will offset losses from the drop in Lynas Rare's long position.

The idea behind Syrah Resources Limited and Lynas Rare Earths 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.