Correlation Between North American and International Metals
Can any of the company-specific risk be diversified away by investing in both North American and International 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 North American and International Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and International Metals Mining, you can compare the effects of market volatilities on North American and International 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 North American with a short position of International Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and International Metals.
Diversification Opportunities for North American and International Metals
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between North and International is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and International Metals Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Metals and North American 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 North American Construction are associated (or correlated) with International Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Metals has no effect on the direction of North American i.e., North American and International Metals go up and down completely randomly.
Pair Corralation between North American and International Metals
Assuming the 90 days trading horizon North American is expected to generate 1.93 times less return on investment than International Metals. But when comparing it to its historical volatility, North American Construction is 4.71 times less risky than International Metals. It trades about 0.06 of its potential returns per unit of risk. International Metals Mining is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 34.00 in International Metals Mining on September 23, 2024 and sell it today you would lose (27.00) from holding International Metals Mining or give up 79.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Construction vs. International Metals Mining
Performance |
| Timeline |
| North American Const |
| International Metals |
North American and International Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and International Metals
The main advantage of trading using opposite North American and International Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American position performs unexpectedly, International 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 International Metals will offset losses from the drop in International Metals' long position.| North American vs. Mccoy Global | North American vs. Enterprise Group | North American vs. Geodrill Limited | North American vs. iShares Canadian HYBrid |
| International Metals vs. First Majestic Silver | International Metals vs. Ivanhoe Energy | International Metals vs. Orezone Gold Corp | International Metals vs. Faraday Copper 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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