Correlation Between Monumental Minerals and CMC Metals

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

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

Diversification Opportunities for Monumental Minerals and CMC Metals

0.21

Correlation Coefficient

Monumental Minerals  CMC Metals

Modest diversification

The 3 months correlation between Monumental and CMC is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Monumental Minerals Corp and CMC Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMC Metals and Monumental Minerals 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 Monumental Minerals Corp are associated (or correlated) with CMC Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMC Metals has no effect on the direction of Monumental Minerals i.e., Monumental Minerals and CMC Metals go up and down completely randomly.

Pair Corralation between Monumental Minerals and CMC Metals

Assuming the 90 days horizon Monumental Minerals Corp is expected to generate 0.8 times more return on investment than CMC Metals. However, Monumental Minerals Corp is 1.25 times less risky than CMC Metals. It trades about 0.13 of its potential returns per unit of risk. CMC Metals is currently generating about 0.03 per unit of risk. If you would invest  3.19  in Monumental Minerals Corp on December 30, 2024 and sell it today you would earn a total of  2.76  from holding Monumental Minerals Corp or generate 86.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.95%
Values	Daily Returns

Monumental Minerals Corp  vs.  CMC Metals

Monumental Minerals Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monumental Minerals Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Monumental Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Monumental Minerals and CMC Metals

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

The idea behind Monumental Minerals Corp and CMC 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.