Correlation Between CMC Metals and Ressources Minieres

Can any of the company-specific risk be diversified away by investing in both CMC Metals and Ressources Minieres 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 Ressources Minieres into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CMC Metals and Ressources Minieres Radisson, you can compare the effects of market volatilities on CMC Metals and Ressources Minieres 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 Ressources Minieres. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMC Metals and Ressources Minieres.

Diversification Opportunities for CMC Metals and Ressources Minieres

0.54

Correlation Coefficient

CMC Metals  Ressources Minieres

Very weak diversification

The 3 months correlation between CMC and Ressources is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding CMC Metals and Ressources Minieres Radisson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ressources Minieres 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 Ressources Minieres. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ressources Minieres has no effect on the direction of CMC Metals i.e., CMC Metals and Ressources Minieres go up and down completely randomly.

Pair Corralation between CMC Metals and Ressources Minieres

Assuming the 90 days horizon CMC Metals is expected to generate 3.02 times more return on investment than Ressources Minieres. However, CMC Metals is 3.02 times more volatile than Ressources Minieres Radisson. It trades about 0.06 of its potential returns per unit of risk. Ressources Minieres Radisson is currently generating about 0.04 per unit of risk. If you would invest  3.00  in CMC Metals on September 13, 2024 and sell it today you would lose (1.00) from holding CMC Metals or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

CMC Metals  vs.  Ressources Minieres Radisson

CMC Metals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CMC Metals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CMC Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Ressources Minieres

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ressources Minieres Radisson are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Ressources Minieres showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CMC Metals and Ressources Minieres

The main advantage of trading using opposite CMC Metals and Ressources Minieres positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMC Metals position performs unexpectedly, Ressources Minieres 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 Ressources Minieres will offset losses from the drop in Ressources Minieres' long position.

The idea behind CMC Metals and Ressources Minieres Radisson pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Stocks Directory module to find actively traded stocks across global markets.