Correlation Between Commercial Metals and US Gold
Can any of the company-specific risk be diversified away by investing in both Commercial Metals and US Gold 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 Commercial Metals and US Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commercial Metals and US Gold Corp, you can compare the effects of market volatilities on Commercial Metals and US Gold 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 Commercial Metals with a short position of US Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commercial Metals and US Gold.
Diversification Opportunities for Commercial Metals and US Gold
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Commercial and USAU is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Commercial Metals and US Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Gold Corp and Commercial Metals 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 Commercial Metals are associated (or correlated) with US Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Gold Corp has no effect on the direction of Commercial Metals i.e., Commercial Metals and US Gold go up and down completely randomly.
Pair Corralation between Commercial Metals and US Gold
Considering the 90-day investment horizon Commercial Metals is expected to generate 4.11 times less return on investment than US Gold. But when comparing it to its historical volatility, Commercial Metals is 1.93 times less risky than US Gold. It trades about 0.03 of its potential returns per unit of risk. US Gold Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 421.00 in US Gold Corp on September 19, 2024 and sell it today you would earn a total of 249.00 from holding US Gold Corp or generate 59.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commercial Metals vs. US Gold Corp
Performance |
| Timeline |
| Commercial Metals |
| US Gold Corp |
Commercial Metals and US Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commercial Metals and US Gold
The main advantage of trading using opposite Commercial Metals and US Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commercial Metals position performs unexpectedly, US Gold 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 US Gold will offset losses from the drop in US Gold's long position.| Commercial Metals vs. Olympic Steel | Commercial Metals vs. Steel Dynamics | Commercial Metals vs. Nucor Corp | Commercial Metals vs. Universal Stainless Alloy |
| US Gold vs. Olympic Steel | US Gold vs. Steel Dynamics | US Gold vs. Commercial Metals | US Gold vs. Nucor Corp |
Check out your portfolio center.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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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