Correlation Between CMC Metals and Kodiak Copper

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

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

Diversification Opportunities for CMC Metals and Kodiak Copper

-0.19

Correlation Coefficient

CMC Metals  Kodiak Copper

Good diversification

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

Pair Corralation between CMC Metals and Kodiak Copper

Assuming the 90 days horizon CMC Metals is expected to generate 11.07 times more return on investment than Kodiak Copper. However, CMC Metals is 11.07 times more volatile than Kodiak Copper Corp. It trades about 0.17 of its potential returns per unit of risk. Kodiak Copper Corp is currently generating about -0.04 per unit of risk. If you would invest  1.00  in CMC Metals on September 2, 2024 and sell it today you would earn a total of  0.42  from holding CMC Metals or generate 42.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CMC Metals  vs.  Kodiak Copper Corp

CMC Metals

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CMC Metals are ranked lower than 13 (%) 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.

Kodiak Copper Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kodiak Copper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CMC Metals and Kodiak Copper

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

The idea behind CMC Metals and Kodiak Copper 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.