Correlation Between McEwen Mining and US Bancorp

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

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

Diversification Opportunities for McEwen Mining and US Bancorp

0.63

Correlation Coefficient

McEwen Mining  US Bancorp

Poor diversification

The 3 months correlation between McEwen and USB is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding McEwen Mining and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp and McEwen Mining 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 McEwen Mining are associated (or correlated) with US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of McEwen Mining i.e., McEwen Mining and US Bancorp go up and down completely randomly.

Pair Corralation between McEwen Mining and US Bancorp

Assuming the 90 days trading horizon McEwen Mining is expected to generate 1.21 times less return on investment than US Bancorp. In addition to that, McEwen Mining is 1.14 times more volatile than US Bancorp. It trades about 0.13 of its total potential returns per unit of risk. US Bancorp is currently generating about 0.18 per unit of volatility. If you would invest  84,270  in US Bancorp on September 14, 2024 and sell it today you would earn a total of  20,674  from holding US Bancorp or generate 24.53% return on investment over 90 days.

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

McEwen Mining  vs.  US Bancorp

McEwen Mining

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in McEwen Mining are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, McEwen Mining showed solid returns over the last few months and may actually be approaching a breakup point.

US Bancorp

Risk-Adjusted Performance

13 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, US Bancorp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with McEwen Mining and US Bancorp

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

The idea behind McEwen Mining and US Bancorp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.