Correlation Between Commercial Metals and Hudbay Minerals

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

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

Diversification Opportunities for Commercial Metals and Hudbay Minerals

0.06

Correlation Coefficient

Commercial Metals  Hudbay Minerals

Significant diversification

The 3 months correlation between Commercial and Hudbay is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Commercial Metals and Hudbay Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hudbay Minerals and Commercial 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 Commercial Metals are associated (or correlated) with Hudbay Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hudbay Minerals has no effect on the direction of Commercial Metals i.e., Commercial Metals and Hudbay Minerals go up and down completely randomly.

Pair Corralation between Commercial Metals and Hudbay Minerals

Considering the 90-day investment horizon Commercial Metals is expected to generate 3.75 times less return on investment than Hudbay Minerals. But when comparing it to its historical volatility, Commercial Metals is 1.47 times less risky than Hudbay Minerals. It trades about 0.02 of its potential returns per unit of risk. Hudbay Minerals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  506.00  in Hudbay Minerals on September 21, 2024 and sell it today you would earn a total of  285.00  from holding Hudbay Minerals or generate 56.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Commercial Metals  vs.  Hudbay Minerals

Commercial Metals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hudbay Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hudbay Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Hudbay Minerals is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Commercial Metals and Hudbay Minerals

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

The idea behind Commercial Metals and Hudbay Minerals 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.