Correlation Between Compania and Cartier Iron

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

By analyzing existing cross correlation between Compania de Minas and Cartier Iron Corp, you can compare the effects of market volatilities on Compania and Cartier Iron 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 Compania with a short position of Cartier Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and Cartier Iron.

Diversification Opportunities for Compania and Cartier Iron

0.57

Correlation Coefficient

Compania  Cartier Iron

Very weak diversification

The 3 months correlation between Compania and Cartier is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Minas and Cartier Iron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cartier Iron Corp and Compania 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 Compania de Minas are associated (or correlated) with Cartier Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cartier Iron Corp has no effect on the direction of Compania i.e., Compania and Cartier Iron go up and down completely randomly.

Pair Corralation between Compania and Cartier Iron

Considering the 90-day investment horizon Compania de Minas is expected to under-perform the Cartier Iron. But the stock apears to be less risky and, when comparing its historical volatility, Compania de Minas is 23.65 times less risky than Cartier Iron. The stock trades about -0.08 of its potential returns per unit of risk. The Cartier Iron Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Cartier Iron Corp on September 27, 2024 and sell it today you would lose (4.93) from holding Cartier Iron Corp or give up 44.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Compania de Minas  vs.  Cartier Iron Corp

Compania de Minas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compania de Minas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Cartier Iron Corp

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cartier Iron Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward indicators, Cartier Iron reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compania and Cartier Iron

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

The idea behind Compania de Minas and Cartier Iron Corp 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.