Correlation Between GoldMining and Commercial Metals
Can any of the company-specific risk be diversified away by investing in both GoldMining and Commercial 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 GoldMining and Commercial Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GoldMining and Commercial Metals, you can compare the effects of market volatilities on GoldMining and Commercial 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 GoldMining with a short position of Commercial Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of GoldMining and Commercial Metals.
Diversification Opportunities for GoldMining and Commercial Metals
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GoldMining and Commercial is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding GoldMining and Commercial Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commercial Metals and GoldMining 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 GoldMining are associated (or correlated) with Commercial Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commercial Metals has no effect on the direction of GoldMining i.e., GoldMining and Commercial Metals go up and down completely randomly.
Pair Corralation between GoldMining and Commercial Metals
Given the investment horizon of 90 days GoldMining is expected to under-perform the Commercial Metals. But the stock apears to be less risky and, when comparing its historical volatility, GoldMining is 1.19 times less risky than Commercial Metals. The stock trades about -0.12 of its potential returns per unit of risk. The Commercial Metals is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 5,413 in Commercial Metals on August 28, 2024 and sell it today you would earn a total of 818.00 from holding Commercial Metals or generate 15.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GoldMining vs. Commercial Metals
Performance |
| Timeline |
| GoldMining |
| Commercial Metals |
GoldMining and Commercial Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GoldMining and Commercial Metals
The main advantage of trading using opposite GoldMining and Commercial Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GoldMining position performs unexpectedly, Commercial 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 Commercial Metals will offset losses from the drop in Commercial Metals' long position.| GoldMining vs. Gold Royalty Corp | GoldMining vs. Uranium Royalty Corp | GoldMining vs. Metalla Royalty Streaming | GoldMining vs. Equinox Gold 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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