Correlation Between Mountain Province and Sherritt International

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

By analyzing existing cross correlation between Mountain Province Diamonds and Sherritt International, you can compare the effects of market volatilities on Mountain Province and Sherritt International 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 Mountain Province with a short position of Sherritt International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mountain Province and Sherritt International.

Diversification Opportunities for Mountain Province and Sherritt International

0.52

Correlation Coefficient

Mountain Province  Sherritt International

Very weak diversification

The 3 months correlation between Mountain and Sherritt is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Mountain Province Diamonds and Sherritt International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sherritt International and Mountain Province 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 Mountain Province Diamonds are associated (or correlated) with Sherritt International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sherritt International has no effect on the direction of Mountain Province i.e., Mountain Province and Sherritt International go up and down completely randomly.

Pair Corralation between Mountain Province and Sherritt International

Assuming the 90 days trading horizon Mountain Province Diamonds is expected to under-perform the Sherritt International. In addition to that, Mountain Province is 3.08 times more volatile than Sherritt International. It trades about -0.13 of its total potential returns per unit of risk. Sherritt International is currently generating about -0.22 per unit of volatility. If you would invest  12.00  in Sherritt International on October 17, 2024 and sell it today you would lose (1.00) from holding Sherritt International or give up 8.33% of portfolio value over 90 days.

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

Mountain Province Diamonds  vs.  Sherritt International

Mountain Province

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mountain Province Diamonds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Sherritt International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sherritt International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sherritt International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mountain Province and Sherritt International

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

The idea behind Mountain Province Diamonds and Sherritt International 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.