Correlation Between Imperial Metals and CopperCorp Resources

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

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

Diversification Opportunities for Imperial Metals and CopperCorp Resources

-0.52

Correlation Coefficient

Imperial Metals  CopperCorp Resources

Excellent diversification

The 3 months correlation between Imperial and CopperCorp is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Metals and CopperCorp Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CopperCorp Resources and Imperial 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 Imperial Metals are associated (or correlated) with CopperCorp Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CopperCorp Resources has no effect on the direction of Imperial Metals i.e., Imperial Metals and CopperCorp Resources go up and down completely randomly.

Pair Corralation between Imperial Metals and CopperCorp Resources

Assuming the 90 days horizon Imperial Metals is expected to generate 57.69 times less return on investment than CopperCorp Resources. But when comparing it to its historical volatility, Imperial Metals is 5.74 times less risky than CopperCorp Resources. It trades about 0.02 of its potential returns per unit of risk. CopperCorp Resources is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6.15  in CopperCorp Resources on September 11, 2024 and sell it today you would earn a total of  6.85  from holding CopperCorp Resources or generate 111.38% return on investment over 90 days.

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

Imperial Metals  vs.  CopperCorp Resources

Imperial Metals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Imperial Metals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

CopperCorp Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CopperCorp Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CopperCorp Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Imperial Metals and CopperCorp Resources

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

The idea behind Imperial Metals and CopperCorp Resources 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.