Correlation Between CMC Metals and SilverCrest Metals

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

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

Diversification Opportunities for CMC Metals and SilverCrest Metals

-0.27

Correlation Coefficient

CMC Metals  SilverCrest Metals

Very good diversification

The 3 months correlation between CMC and SilverCrest is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding CMC Metals and SilverCrest Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SilverCrest Metals 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 SilverCrest Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SilverCrest Metals has no effect on the direction of CMC Metals i.e., CMC Metals and SilverCrest Metals go up and down completely randomly.

Pair Corralation between CMC Metals and SilverCrest Metals

Assuming the 90 days horizon CMC Metals is expected to generate 1.96 times less return on investment than SilverCrest Metals. In addition to that, CMC Metals is 4.95 times more volatile than SilverCrest Metals. It trades about 0.03 of its total potential returns per unit of risk. SilverCrest Metals is currently generating about 0.27 per unit of volatility. If you would invest  892.00  in SilverCrest Metals on December 30, 2024 and sell it today you would earn a total of  263.00  from holding SilverCrest Metals or generate 29.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	62.75%
Values	Daily Returns

CMC Metals  vs.  SilverCrest Metals

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.

SilverCrest Metals

Risk-Adjusted Performance

Solid

Over the last 90 days SilverCrest Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly conflicting essential indicators, SilverCrest Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CMC Metals and SilverCrest Metals

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

The idea behind CMC Metals and SilverCrest Metals 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.