Correlation Between Cartier Iron and CMC Metals

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

By analyzing existing cross correlation between Cartier Iron Corp and CMC Metals, you can compare the effects of market volatilities on Cartier Iron and CMC 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 Cartier Iron with a short position of CMC Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cartier Iron and CMC Metals.

Diversification Opportunities for Cartier Iron and CMC Metals

-0.13

Correlation Coefficient

Cartier Iron  CMC Metals

Good diversification

The 3 months correlation between Cartier and CMC is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Cartier Iron Corp and CMC Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMC Metals and Cartier Iron 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 Cartier Iron Corp are associated (or correlated) with CMC Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMC Metals has no effect on the direction of Cartier Iron i.e., Cartier Iron and CMC Metals go up and down completely randomly.

Pair Corralation between Cartier Iron and CMC Metals

Assuming the 90 days horizon Cartier Iron Corp is expected to generate 2.55 times more return on investment than CMC Metals. However, Cartier Iron is 2.55 times more volatile than CMC Metals. It trades about 0.07 of its potential returns per unit of risk. CMC Metals is currently generating about 0.07 per unit of risk. If you would invest  24.00  in Cartier Iron Corp on August 31, 2024 and sell it today you would lose (18.50) from holding Cartier Iron Corp or give up 77.08% of portfolio value over 90 days.

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

Cartier Iron Corp  vs.  CMC Metals

Cartier Iron Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cartier Iron Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal forward indicators, Cartier Iron reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Cartier Iron and CMC Metals

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

The idea behind Cartier Iron Corp and CMC 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.