Correlation Between Tarku Resources and CMC Metals

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

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

Diversification Opportunities for Tarku Resources and CMC Metals

0.1

Correlation Coefficient

Tarku Resources  CMC Metals

Average diversification

The 3 months correlation between Tarku and CMC is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Tarku Resources and CMC Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMC Metals and Tarku Resources 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 Tarku Resources 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 Tarku Resources i.e., Tarku Resources and CMC Metals go up and down completely randomly.

Pair Corralation between Tarku Resources and CMC Metals

Assuming the 90 days horizon Tarku Resources is not expected to generate positive returns. However, Tarku Resources is 1.37 times less risky than CMC Metals. It waists most of its returns potential to compensate for thr risk taken. CMC Metals is generating about 0.04 per unit of risk. If you would invest  3.00  in CMC Metals on December 3, 2024 and sell it today you would lose (1.00) from holding CMC Metals or give up 33.33% of portfolio value over 90 days.

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

Tarku Resources  vs.  CMC Metals

Tarku Resources

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tarku Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Tarku Resources showed solid returns over the last few months and may actually be approaching a breakup point.

CMC Metals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CMC Metals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CMC Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tarku Resources and CMC Metals

The main advantage of trading using opposite Tarku Resources and CMC Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tarku Resources 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 Tarku Resources 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.