Correlation Between Ucore Rare and Arafura Resources

Can any of the company-specific risk be diversified away by investing in both Ucore Rare and Arafura Resources 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 Arafura Resources 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 Arafura Resources, you can compare the effects of market volatilities on Ucore Rare and Arafura Resources 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 Arafura Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ucore Rare and Arafura Resources.

Diversification Opportunities for Ucore Rare and Arafura Resources

0.45

Correlation Coefficient

Ucore Rare  Arafura Resources

Very weak diversification

The 3 months correlation between Ucore and Arafura is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ucore Rare Metals and Arafura Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arafura Resources 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 Arafura Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arafura Resources has no effect on the direction of Ucore Rare i.e., Ucore Rare and Arafura Resources go up and down completely randomly.

Pair Corralation between Ucore Rare and Arafura Resources

Assuming the 90 days horizon Ucore Rare Metals is expected to generate 0.97 times more return on investment than Arafura Resources. However, Ucore Rare Metals is 1.04 times less risky than Arafura Resources. It trades about 0.06 of its potential returns per unit of risk. Arafura Resources is currently generating about 0.02 per unit of risk. If you would invest  126.00  in Ucore Rare Metals on May 7, 2025 and sell it today you would earn a total of  12.00  from holding Ucore Rare Metals or generate 9.52% 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.  Arafura Resources

Ucore Rare Metals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ucore Rare Metals are ranked lower than 4 (%) 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.

Arafura Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arafura Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Arafura Resources may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Ucore Rare and Arafura Resources

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

The idea behind Ucore Rare Metals and Arafura Resources 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.