Correlation Between CMC Metals and Dow Jones
Can any of the company-specific risk be diversified away by investing in both CMC Metals and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMC Metals and Dow Jones Industrial, you can compare the effects of market volatilities on CMC Metals and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMC Metals and Dow Jones.
Diversification Opportunities for CMC Metals and Dow Jones
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between CMC and Dow is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding CMC Metals and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of CMC Metals i.e., CMC Metals and Dow Jones go up and down completely randomly.
Pair Corralation between CMC Metals and Dow Jones
Assuming the 90 days horizon CMC Metals is expected to generate 34.59 times more return on investment than Dow Jones. However, CMC Metals is 34.59 times more volatile than Dow Jones Industrial. It trades about 0.08 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.11 per unit of risk. If you would invest 10.00 in CMC Metals on September 2, 2024 and sell it today you would lose (8.58) from holding CMC Metals or give up 85.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CMC Metals vs. Dow Jones Industrial
Performance |
| Timeline |
CMC Metals and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
CMC Metals
Pair trading matchups for CMC Metals
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with CMC Metals and Dow Jones
The main advantage of trading using opposite CMC Metals and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMC Metals position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' 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 |
| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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