Correlation Between CMC Metals and Alien Metals
Can any of the company-specific risk be diversified away by investing in both CMC Metals and Alien Metals 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 CMC Metals and Alien Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMC Metals and Alien Metals, you can compare the effects of market volatilities on CMC Metals and Alien Metals 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 CMC Metals with a short position of Alien Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMC Metals and Alien Metals.
Diversification Opportunities for CMC Metals and Alien Metals
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between CMC and Alien is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding CMC Metals and Alien Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alien Metals and CMC 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 CMC Metals are associated (or correlated) with Alien Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alien Metals has no effect on the direction of CMC Metals i.e., CMC Metals and Alien Metals go up and down completely randomly.
Pair Corralation between CMC Metals and Alien Metals
Assuming the 90 days horizon CMC Metals is expected to generate 7.17 times less return on investment than Alien Metals. But when comparing it to its historical volatility, CMC Metals is 4.69 times less risky than Alien Metals. It trades about 0.13 of its potential returns per unit of risk. Alien Metals is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 0.18 in Alien Metals on September 3, 2024 and sell it today you would lose (0.06) from holding Alien Metals or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
CMC Metals vs. Alien Metals
Performance |
| Timeline |
| CMC Metals |
| Alien Metals |
CMC Metals and Alien Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMC Metals and Alien Metals
The main advantage of trading using opposite CMC Metals and Alien Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMC Metals position performs unexpectedly, Alien Metals 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 Alien Metals will offset losses from the drop in Alien Metals' long position.| CMC Metals vs. Bravo Mining Corp | CMC Metals vs. Southern Silver Exploration | CMC Metals vs. AbraSilver Resource Corp | CMC Metals vs. Gatos Silver |
| Alien Metals vs. Cartier Iron Corp | Alien Metals vs. Arctic Star Exploration | Alien Metals vs. Denarius Silver Corp | Alien Metals vs. Pacific Ridge Exploration |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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