Correlation Between Transition Metals and American CuMo

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

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

Diversification Opportunities for Transition Metals and American CuMo

0.69

Correlation Coefficient

Transition Metals  American CuMo

Poor diversification

The 3 months correlation between Transition and American is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Transition Metals Corp and American CuMo Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American CuMo Mining and Transition 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 Transition Metals Corp are associated (or correlated) with American CuMo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American CuMo Mining has no effect on the direction of Transition Metals i.e., Transition Metals and American CuMo go up and down completely randomly.

Pair Corralation between Transition Metals and American CuMo

Assuming the 90 days horizon Transition Metals is expected to generate 2.71 times less return on investment than American CuMo. But when comparing it to its historical volatility, Transition Metals Corp is 1.6 times less risky than American CuMo. It trades about 0.02 of its potential returns per unit of risk. American CuMo Mining is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2.00  in American CuMo Mining on September 14, 2024 and sell it today you would lose (1.00) from holding American CuMo Mining or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

Transition Metals Corp  vs.  American CuMo Mining

Transition Metals Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transition Metals Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Transition Metals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

American CuMo Mining

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American CuMo Mining are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal fundamental indicators, American CuMo reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transition Metals and American CuMo

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

The idea behind Transition Metals Corp and American CuMo 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.