Correlation Between Alien Metals and McEwen Mining

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

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

Diversification Opportunities for Alien Metals and McEwen Mining

0.45

Correlation Coefficient

Alien Metals  McEwen Mining

Very weak diversification

The 3 months correlation between Alien and McEwen is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Alien Metals and McEwen Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McEwen Mining and Alien 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 Alien Metals 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 Alien Metals i.e., Alien Metals and McEwen Mining go up and down completely randomly.

Pair Corralation between Alien Metals and McEwen Mining

Assuming the 90 days horizon Alien Metals is expected to generate 8.48 times more return on investment than McEwen Mining. However, Alien Metals is 8.48 times more volatile than McEwen Mining. It trades about 0.24 of its potential returns per unit of risk. McEwen Mining is currently generating about -0.08 per unit of risk. If you would invest  0.11  in Alien Metals on October 8, 2024 and sell it today you would earn a total of  0.12  from holding Alien Metals or generate 109.09% return on investment over 90 days.

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

Alien Metals  vs.  McEwen Mining

Alien Metals

Risk-Adjusted Performance

11 of 100

Good

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

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 conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Alien Metals and McEwen Mining

The main advantage of trading using opposite Alien Metals and McEwen Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alien Metals 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 Alien Metals 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.