Correlation Between Integra Resources and CMC Metals

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

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

Diversification Opportunities for Integra Resources and CMC Metals

0.21

Correlation Coefficient

Integra Resources  CMC Metals

Modest diversification

The 3 months correlation between Integra and CMC is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Integra Resources Corp and CMC Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMC Metals and Integra Resources 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 Integra Resources 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 Integra Resources i.e., Integra Resources and CMC Metals go up and down completely randomly.

Pair Corralation between Integra Resources and CMC Metals

Given the investment horizon of 90 days Integra Resources is expected to generate 30.6 times less return on investment than CMC Metals. But when comparing it to its historical volatility, Integra Resources Corp is 9.0 times less risky than CMC Metals. It trades about 0.04 of its potential returns per unit of risk. CMC Metals is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2.00  in CMC Metals on September 2, 2024 and sell it today you would lose (0.58) from holding CMC Metals or give up 29.0% of portfolio value over 90 days.

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

Integra Resources Corp  vs.  CMC Metals

Integra Resources Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Integra Resources Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Integra Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with Integra Resources and CMC Metals

The main advantage of trading using opposite Integra Resources and CMC Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Integra Resources 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 Integra Resources 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.