Correlation Between CMC Metals and Defiance Silver
Can any of the company-specific risk be diversified away by investing in both CMC Metals and Defiance Silver 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 Defiance Silver into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMC Metals and Defiance Silver Corp, you can compare the effects of market volatilities on CMC Metals and Defiance Silver 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 Defiance Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMC Metals and Defiance Silver.
Diversification Opportunities for CMC Metals and Defiance Silver
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between CMC and Defiance is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding CMC Metals and Defiance Silver Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance Silver Corp 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 Defiance Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance Silver Corp has no effect on the direction of CMC Metals i.e., CMC Metals and Defiance Silver go up and down completely randomly.
Pair Corralation between CMC Metals and Defiance Silver
Assuming the 90 days horizon CMC Metals is expected to generate 4.6 times more return on investment than Defiance Silver. However, CMC Metals is 4.6 times more volatile than Defiance Silver Corp. It trades about 0.13 of its potential returns per unit of risk. Defiance Silver Corp is currently generating about 0.0 per unit of risk. If you would invest 2.00 in CMC Metals on September 1, 2024 and sell it today you would lose (0.58) from holding CMC Metals or give up 29.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CMC Metals vs. Defiance Silver Corp
Performance |
| Timeline |
| CMC Metals |
| Defiance Silver Corp |
CMC Metals and Defiance Silver Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMC Metals and Defiance Silver
The main advantage of trading using opposite CMC Metals and Defiance Silver positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMC Metals position performs unexpectedly, Defiance Silver 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 Defiance Silver will offset losses from the drop in Defiance Silver's long position.| CMC Metals vs. South32 Limited | CMC Metals vs. NioCorp Developments Ltd | CMC Metals vs. HUMANA INC | CMC Metals vs. SCOR PK |
| Defiance Silver vs. Aftermath Silver | Defiance Silver vs. AbraSilver Resource Corp | Defiance Silver vs. Southern Silver Exploration | Defiance Silver vs. Blackrock Silver 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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