Correlation Between CMC Metals and GoGold Resources
Can any of the company-specific risk be diversified away by investing in both CMC Metals and GoGold 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 CMC Metals and GoGold Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMC Metals and GoGold Resources, you can compare the effects of market volatilities on CMC Metals and GoGold 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 CMC Metals with a short position of GoGold Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMC Metals and GoGold Resources.
Diversification Opportunities for CMC Metals and GoGold Resources
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CMC and GoGold is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding CMC Metals and GoGold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoGold Resources 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 GoGold Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoGold Resources has no effect on the direction of CMC Metals i.e., CMC Metals and GoGold Resources go up and down completely randomly.
Pair Corralation between CMC Metals and GoGold Resources
Assuming the 90 days horizon CMC Metals is expected to generate 12.74 times more return on investment than GoGold Resources. However, CMC Metals is 12.74 times more volatile than GoGold Resources. It trades about 0.13 of its potential returns per unit of risk. GoGold Resources is currently generating about 0.39 per unit of risk. If you would invest 2.00 in CMC Metals on November 3, 2024 and sell it today you would lose (0.65) from holding CMC Metals or give up 32.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CMC Metals vs. GoGold Resources
Performance |
| Timeline |
| CMC Metals |
| GoGold Resources |
CMC Metals and GoGold Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMC Metals and GoGold Resources
The main advantage of trading using opposite CMC Metals and GoGold Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMC Metals position performs unexpectedly, GoGold 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 GoGold Resources will offset losses from the drop in GoGold Resources' long position.| CMC Metals vs. Bravo Mining Corp | CMC Metals vs. Southern Silver Exploration | CMC Metals vs. AbraSilver Resource Corp | CMC Metals vs. Outcrop Gold Corp |
| GoGold Resources vs. Regenx Tech Corp | GoGold Resources vs. P2 Gold | GoGold Resources vs. Max Resource Corp | GoGold Resources 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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