Correlation Between CMC Metals and Bravo Mining

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

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

Diversification Opportunities for CMC Metals and Bravo Mining

-0.19

Correlation Coefficient

CMC Metals  Bravo Mining

Good diversification

The 3 months correlation between CMC and Bravo is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding CMC Metals and Bravo Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bravo Mining Corp 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 Bravo Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bravo Mining Corp has no effect on the direction of CMC Metals i.e., CMC Metals and Bravo Mining go up and down completely randomly.

Pair Corralation between CMC Metals and Bravo Mining

Assuming the 90 days horizon CMC Metals is expected to generate 1.41 times less return on investment than Bravo Mining. In addition to that, CMC Metals is 2.12 times more volatile than Bravo Mining Corp. It trades about 0.04 of its total potential returns per unit of risk. Bravo Mining Corp is currently generating about 0.13 per unit of volatility. If you would invest  117.00  in Bravo Mining Corp on December 27, 2024 and sell it today you would earn a total of  61.00  from holding Bravo Mining Corp or generate 52.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.25%
Values	Daily Returns

CMC Metals  vs.  Bravo Mining Corp

CMC Metals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CMC Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, CMC Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Bravo Mining Corp

Risk-Adjusted Performance

OK

Over the last 90 days Bravo Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak primary indicators, Bravo Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CMC Metals and Bravo Mining

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

The idea behind CMC Metals and Bravo Mining 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.