Correlation Between CMC Metals and Western Alaska
Can any of the company-specific risk be diversified away by investing in both CMC Metals and Western Alaska 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 Western Alaska into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMC Metals and Western Alaska Minerals, you can compare the effects of market volatilities on CMC Metals and Western Alaska 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 Western Alaska. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMC Metals and Western Alaska.
Diversification Opportunities for CMC Metals and Western Alaska
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between CMC and Western is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding CMC Metals and Western Alaska Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Alaska Minerals 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 Western Alaska. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Alaska Minerals has no effect on the direction of CMC Metals i.e., CMC Metals and Western Alaska go up and down completely randomly.
Pair Corralation between CMC Metals and Western Alaska
Assuming the 90 days horizon CMC Metals is expected to generate 4.17 times more return on investment than Western Alaska. However, CMC Metals is 4.17 times more volatile than Western Alaska Minerals. It trades about 0.13 of its potential returns per unit of risk. Western Alaska Minerals is currently generating about 0.01 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 | 99.21% |
| Values | Daily Returns |
CMC Metals vs. Western Alaska Minerals
Performance |
| Timeline |
| CMC Metals |
| Western Alaska Minerals |
CMC Metals and Western Alaska Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMC Metals and Western Alaska
The main advantage of trading using opposite CMC Metals and Western Alaska positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMC Metals position performs unexpectedly, Western Alaska 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 Western Alaska will offset losses from the drop in Western Alaska's long position.| CMC Metals vs. South32 Limited | CMC Metals vs. NioCorp Developments Ltd | CMC Metals vs. HUMANA INC | CMC Metals vs. SCOR PK |
| Western Alaska vs. First Tellurium Corp | Western Alaska vs. Max Resource Corp | Western Alaska vs. P2 Gold | Western Alaska vs. CMC Metals |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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