Correlation Between Ucore Rare and NGEx Minerals

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

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

Diversification Opportunities for Ucore Rare and NGEx Minerals

0.43

Correlation Coefficient

Ucore Rare  NGEx Minerals

Very weak diversification

The 3 months correlation between Ucore and NGEx is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ucore Rare Metals and NGEx Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGEx Minerals and Ucore Rare 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 Ucore Rare Metals are associated (or correlated) with NGEx Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGEx Minerals has no effect on the direction of Ucore Rare i.e., Ucore Rare and NGEx Minerals go up and down completely randomly.

Pair Corralation between Ucore Rare and NGEx Minerals

Assuming the 90 days horizon Ucore Rare Metals is expected to generate 2.26 times more return on investment than NGEx Minerals. However, Ucore Rare is 2.26 times more volatile than NGEx Minerals. It trades about 0.16 of its potential returns per unit of risk. NGEx Minerals is currently generating about 0.18 per unit of risk. If you would invest  41.00  in Ucore Rare Metals on September 12, 2024 and sell it today you would earn a total of  21.00  from holding Ucore Rare Metals or generate 51.22% return on investment over 90 days.

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

Ucore Rare Metals  vs.  NGEx Minerals

Ucore Rare Metals

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ucore Rare Metals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ucore Rare reported solid returns over the last few months and may actually be approaching a breakup point.

NGEx Minerals

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NGEx Minerals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NGEx Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ucore Rare and NGEx Minerals

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

The idea behind Ucore Rare Metals and NGEx Minerals 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.