Correlation Between CMC Metals and Silver Wolf

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

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

Diversification Opportunities for CMC Metals and Silver Wolf

-0.2

Correlation Coefficient

CMC Metals  Silver Wolf

Good diversification

The 3 months correlation between CMC and Silver is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding CMC Metals and Silver Wolf Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Wolf Exploration 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 Silver Wolf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Wolf Exploration has no effect on the direction of CMC Metals i.e., CMC Metals and Silver Wolf go up and down completely randomly.

Pair Corralation between CMC Metals and Silver Wolf

Assuming the 90 days horizon CMC Metals is expected to generate 2.02 times less return on investment than Silver Wolf. In addition to that, CMC Metals is 1.2 times more volatile than Silver Wolf Exploration. It trades about 0.03 of its total potential returns per unit of risk. Silver Wolf Exploration is currently generating about 0.07 per unit of volatility. If you would invest  8.00  in Silver Wolf Exploration on December 28, 2024 and sell it today you would earn a total of  0.47  from holding Silver Wolf Exploration or generate 5.87% return on investment over 90 days.

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

CMC Metals  vs.  Silver Wolf Exploration

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.

Silver Wolf Exploration

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Silver Wolf Exploration are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Silver Wolf reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CMC Metals and Silver Wolf

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

The idea behind CMC Metals and Silver Wolf Exploration 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.