Correlation Between CMC Metals and Silver Tiger

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

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

Diversification Opportunities for CMC Metals and Silver Tiger

-0.32

Correlation Coefficient

CMC Metals  Silver Tiger

Very good diversification

The 3 months correlation between CMC and Silver is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding CMC Metals and Silver Tiger Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Tiger Metals 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 Silver Tiger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Tiger Metals has no effect on the direction of CMC Metals i.e., CMC Metals and Silver Tiger go up and down completely randomly.

Pair Corralation between CMC Metals and Silver Tiger

Assuming the 90 days horizon CMC Metals is expected to generate 6.96 times more return on investment than Silver Tiger. However, CMC Metals is 6.96 times more volatile than Silver Tiger Metals. It trades about 0.16 of its potential returns per unit of risk. Silver Tiger Metals is currently generating about 0.05 per unit of risk. If you would invest  1.00  in CMC Metals on August 31, 2024 and sell it today you would earn a total of  0.00  from holding CMC Metals or generate 0.0% 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.  Silver Tiger Metals

CMC Metals

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CMC Metals are ranked lower than 12 (%) 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.

Silver Tiger Metals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Silver Tiger Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Silver Tiger reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CMC Metals and Silver Tiger

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

The idea behind CMC Metals and Silver Tiger Metals 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.