Correlation Between Max Resource and CMC Metals
Can any of the company-specific risk be diversified away by investing in both Max Resource and CMC 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 Max Resource and CMC Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Max Resource Corp and CMC Metals, you can compare the effects of market volatilities on Max Resource and CMC 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 Max Resource with a short position of CMC Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Max Resource and CMC Metals.
Diversification Opportunities for Max Resource and CMC Metals
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Max and CMC is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Max Resource Corp and CMC Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMC Metals and Max Resource 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 Max Resource Corp are associated (or correlated) with CMC Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMC Metals has no effect on the direction of Max Resource i.e., Max Resource and CMC Metals go up and down completely randomly.
Pair Corralation between Max Resource and CMC Metals
Assuming the 90 days horizon Max Resource Corp is expected to under-perform the CMC Metals. But the pink sheet apears to be less risky and, when comparing its historical volatility, Max Resource Corp is 2.74 times less risky than CMC Metals. The pink sheet trades about -0.01 of its potential returns per unit of risk. The CMC Metals is currently generating about 0.13 of returns per unit of risk over similar time horizon. 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Max Resource Corp vs. CMC Metals
Performance |
| Timeline |
| Max Resource Corp |
| CMC Metals |
Max Resource and CMC Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Max Resource and CMC Metals
The main advantage of trading using opposite Max Resource and CMC Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Max Resource position performs unexpectedly, CMC 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 CMC Metals will offset losses from the drop in CMC Metals' long position.| Max Resource vs. Defiance Silver Corp | Max Resource vs. HUMANA INC | Max Resource vs. SCOR PK | Max Resource vs. Aquagold International |
| CMC Metals vs. South32 Limited | CMC Metals vs. NioCorp Developments Ltd | CMC Metals vs. HUMANA INC | CMC Metals vs. SCOR PK |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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