Correlation Between CMC Metals and Honey Badger

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

By analyzing existing cross correlation between CMC Metals and Honey Badger Silver, you can compare the effects of market volatilities on CMC Metals and Honey Badger 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 Honey Badger. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMC Metals and Honey Badger.

Diversification Opportunities for CMC Metals and Honey Badger

-0.05

Correlation Coefficient

CMC Metals  Honey Badger

Good diversification

The 3 months correlation between CMC and Honey is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding CMC Metals and Honey Badger Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honey Badger Silver 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 Honey Badger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honey Badger Silver has no effect on the direction of CMC Metals i.e., CMC Metals and Honey Badger go up and down completely randomly.

Pair Corralation between CMC Metals and Honey Badger

Assuming the 90 days horizon CMC Metals is expected to generate 2.83 times more return on investment than Honey Badger. However, CMC Metals is 2.83 times more volatile than Honey Badger Silver. It trades about 0.03 of its potential returns per unit of risk. Honey Badger Silver is currently generating about 0.06 per unit of risk. If you would invest  1.74  in CMC Metals on December 28, 2024 and sell it today you would lose (0.56) from holding CMC Metals or give up 32.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	83.61%
Values	Daily Returns

CMC Metals  vs.  Honey Badger Silver

CMC Metals

Risk-Adjusted Performance

Insignificant

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.

Honey Badger Silver

Risk-Adjusted Performance

Insignificant

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

Pair Trading with CMC Metals and Honey Badger

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

The idea behind CMC Metals and Honey Badger Silver 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.