Correlation Between New Pacific and McEwen Mining

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

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

Diversification Opportunities for New Pacific and McEwen Mining

0.66

Correlation Coefficient

New Pacific  McEwen Mining

Poor diversification

The 3 months correlation between New and McEwen is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding New Pacific Metals and McEwen Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McEwen Mining and New Pacific 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 New Pacific Metals are associated (or correlated) with McEwen Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McEwen Mining has no effect on the direction of New Pacific i.e., New Pacific and McEwen Mining go up and down completely randomly.

Pair Corralation between New Pacific and McEwen Mining

Given the investment horizon of 90 days New Pacific Metals is expected to generate 1.11 times more return on investment than McEwen Mining. However, New Pacific is 1.11 times more volatile than McEwen Mining. It trades about 0.04 of its potential returns per unit of risk. McEwen Mining is currently generating about 0.03 per unit of risk. If you would invest  121.00  in New Pacific Metals on December 27, 2024 and sell it today you would earn a total of  5.00  from holding New Pacific Metals or generate 4.13% return on investment over 90 days.

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

New Pacific Metals  vs.  McEwen Mining

New Pacific Metals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in New Pacific Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, New Pacific may actually be approaching a critical reversion point that can send shares even higher in April 2025.

McEwen Mining

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in McEwen Mining are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, McEwen Mining is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with New Pacific and McEwen Mining

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

The idea behind New Pacific Metals and McEwen Mining 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 Valuation module to check real value of public entities based on technical and fundamental data.