Correlation Between CMC Metals and Azucar Minerals

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

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

Diversification Opportunities for CMC Metals and Azucar Minerals

-0.16

Correlation Coefficient

CMC Metals  Azucar Minerals

Good diversification

The 3 months correlation between CMC and Azucar is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding CMC Metals and Azucar Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azucar Minerals and CMC 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 CMC Metals are associated (or correlated) with Azucar Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azucar Minerals has no effect on the direction of CMC Metals i.e., CMC Metals and Azucar Minerals go up and down completely randomly.

Pair Corralation between CMC Metals and Azucar Minerals

Assuming the 90 days horizon CMC Metals is expected to generate 2.09 times less return on investment than Azucar Minerals. In addition to that, CMC Metals is 1.07 times more volatile than Azucar Minerals. It trades about 0.03 of its total potential returns per unit of risk. Azucar Minerals is currently generating about 0.06 per unit of volatility. If you would invest  2.10  in Azucar Minerals on December 28, 2024 and sell it today you would earn a total of  0.00  from holding Azucar Minerals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.0%
Values	Daily Returns

CMC Metals  vs.  Azucar Minerals

CMC Metals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CMC Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CMC Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Azucar Minerals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Azucar Minerals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Azucar Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CMC Metals and Azucar Minerals

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

The idea behind CMC Metals and Azucar 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 Global Correlations module to find global opportunities by holding instruments from different markets.