Correlation Between CMC Metals and P2 Gold

Can any of the company-specific risk be diversified away by investing in both CMC Metals and P2 Gold 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 P2 Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CMC Metals and P2 Gold, you can compare the effects of market volatilities on CMC Metals and P2 Gold 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 P2 Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMC Metals and P2 Gold.

Diversification Opportunities for CMC Metals and P2 Gold

-0.03

Correlation Coefficient

CMC Metals  P2 Gold

Good diversification

The 3 months correlation between CMC and PGLDF is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding CMC Metals and P2 Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on P2 Gold 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 P2 Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of P2 Gold has no effect on the direction of CMC Metals i.e., CMC Metals and P2 Gold go up and down completely randomly.

Pair Corralation between CMC Metals and P2 Gold

Assuming the 90 days horizon CMC Metals is expected to generate 5.26 times more return on investment than P2 Gold. However, CMC Metals is 5.26 times more volatile than P2 Gold. It trades about 0.17 of its potential returns per unit of risk. P2 Gold is currently generating about 0.05 per unit of risk. If you would invest  1.00  in CMC Metals on September 2, 2024 and sell it today you would earn a total of  0.42  from holding CMC Metals or generate 42.0% return on investment over 90 days.

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

CMC Metals  vs.  P2 Gold

CMC Metals

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CMC Metals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CMC Metals reported solid returns over the last few months and may actually be approaching a breakup point.

P2 Gold

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in P2 Gold are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, P2 Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CMC Metals and P2 Gold

The main advantage of trading using opposite CMC Metals and P2 Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMC Metals position performs unexpectedly, P2 Gold 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 P2 Gold will offset losses from the drop in P2 Gold's long position.

The idea behind CMC Metals and P2 Gold 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.