Correlation Between Litigation Capital and McEwen Mining

Can any of the company-specific risk be diversified away by investing in both Litigation Capital and McEwen Mining 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 Litigation Capital and McEwen Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Litigation Capital Management and McEwen Mining, you can compare the effects of market volatilities on Litigation Capital and McEwen Mining 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 Litigation Capital with a short position of McEwen Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Litigation Capital and McEwen Mining.

Diversification Opportunities for Litigation Capital and McEwen Mining

-0.2

Correlation Coefficient

Litigation Capital  McEwen Mining

Good diversification

The 3 months correlation between Litigation and McEwen is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Litigation Capital Management and McEwen Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McEwen Mining and Litigation Capital 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 Litigation Capital Management are associated (or correlated) with McEwen Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McEwen Mining has no effect on the direction of Litigation Capital i.e., Litigation Capital and McEwen Mining go up and down completely randomly.

Pair Corralation between Litigation Capital and McEwen Mining

Assuming the 90 days trading horizon Litigation Capital Management is expected to generate 0.74 times more return on investment than McEwen Mining. However, Litigation Capital Management is 1.34 times less risky than McEwen Mining. It trades about 0.0 of its potential returns per unit of risk. McEwen Mining is currently generating about -0.06 per unit of risk. If you would invest  10,073  in Litigation Capital Management on September 21, 2024 and sell it today you would lose (113.00) from holding Litigation Capital Management or give up 1.12% of portfolio value over 90 days.

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

Litigation Capital Management  vs.  McEwen Mining

Litigation Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Litigation Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Litigation Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

McEwen Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days McEwen Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Litigation Capital and McEwen Mining

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

The idea behind Litigation Capital Management and McEwen Mining 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.