Correlation Between Companhia Siderrgica and McEwen Mining

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

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

Diversification Opportunities for Companhia Siderrgica and McEwen Mining

0.24

Correlation Coefficient

Companhia Siderrgica  McEwen Mining

Modest diversification

The 3 months correlation between Companhia and McEwen is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Siderrgica Nacional and McEwen Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McEwen Mining and Companhia Siderrgica 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 Companhia Siderrgica Nacional 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 Companhia Siderrgica i.e., Companhia Siderrgica and McEwen Mining go up and down completely randomly.

Pair Corralation between Companhia Siderrgica and McEwen Mining

Assuming the 90 days trading horizon Companhia Siderrgica is expected to generate 13.28 times less return on investment than McEwen Mining. In addition to that, Companhia Siderrgica is 1.29 times more volatile than McEwen Mining. It trades about 0.01 of its total potential returns per unit of risk. McEwen Mining is currently generating about 0.13 per unit of volatility. If you would invest  16,600  in McEwen Mining on September 15, 2024 and sell it today you would earn a total of  3,200  from holding McEwen Mining or generate 19.28% return on investment over 90 days.

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

Companhia Siderrgica Nacional  vs.  McEwen Mining

Companhia Siderrgica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Siderrgica Nacional has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Companhia Siderrgica is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Companhia Siderrgica and McEwen Mining

The main advantage of trading using opposite Companhia Siderrgica and McEwen Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Siderrgica 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 Companhia Siderrgica Nacional 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.