Correlation Between Select Sector and McEwen Mining
Can any of the company-specific risk be diversified away by investing in both Select Sector and McEwen Mining 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 Select Sector and McEwen Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Select Sector and McEwen Mining, you can compare the effects of market volatilities on Select Sector and McEwen Mining 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 Select Sector with a short position of McEwen Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Sector and McEwen Mining.
Diversification Opportunities for Select Sector and McEwen Mining
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Select and McEwen is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding The Select Sector and McEwen Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McEwen Mining and Select Sector 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 The Select Sector are associated (or correlated) with McEwen Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McEwen Mining has no effect on the direction of Select Sector i.e., Select Sector and McEwen Mining go up and down completely randomly.
Pair Corralation between Select Sector and McEwen Mining
Assuming the 90 days trading horizon The Select Sector is expected to generate 0.55 times more return on investment than McEwen Mining. However, The Select Sector is 1.8 times less risky than McEwen Mining. It trades about -0.03 of its potential returns per unit of risk. McEwen Mining is currently generating about -0.17 per unit of risk. If you would invest 169,193 in The Select Sector on November 27, 2024 and sell it today you would lose (5,901) from holding The Select Sector or give up 3.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Select Sector vs. McEwen Mining
Performance |
| Timeline |
| Select Sector |
| McEwen Mining |
Select Sector and McEwen Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Sector and McEwen Mining
The main advantage of trading using opposite Select Sector and McEwen Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Sector position performs unexpectedly, McEwen Mining 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 McEwen Mining will offset losses from the drop in McEwen Mining's long position.| Select Sector vs. The Select Sector | Select Sector vs. The Select Sector | Select Sector vs. The Select Sector | Select Sector vs. The Select Sector |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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