Correlation Between CMC Metals and Mountain Boy

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

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

Diversification Opportunities for CMC Metals and Mountain Boy

-0.23

Correlation Coefficient

CMC Metals  Mountain Boy

Very good diversification

The 3 months correlation between CMC and Mountain is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding CMC Metals and Mountain Boy Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mountain Boy 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 Mountain Boy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mountain Boy Minerals has no effect on the direction of CMC Metals i.e., CMC Metals and Mountain Boy go up and down completely randomly.

Pair Corralation between CMC Metals and Mountain Boy

Assuming the 90 days horizon CMC Metals is expected to generate 2.9 times less return on investment than Mountain Boy. In addition to that, CMC Metals is 1.25 times more volatile than Mountain Boy Minerals. It trades about 0.03 of its total potential returns per unit of risk. Mountain Boy Minerals is currently generating about 0.1 per unit of volatility. If you would invest  0.98  in Mountain Boy Minerals on December 29, 2024 and sell it today you would earn a total of  0.42  from holding Mountain Boy Minerals or generate 42.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.95%
Values	Daily Returns

CMC Metals  vs.  Mountain Boy 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.

Mountain Boy Minerals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mountain Boy Minerals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Mountain Boy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CMC Metals and Mountain Boy

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

The idea behind CMC Metals and Mountain Boy 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.