Correlation Between United States and Newmont

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

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

Diversification Opportunities for United States and Newmont

0.61

Correlation Coefficient

United States  Newmont

Poor diversification

The 3 months correlation between United and Newmont is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Newmont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newmont and United States 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 United States Steel are associated (or correlated) with Newmont. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newmont has no effect on the direction of United States i.e., United States and Newmont go up and down completely randomly.

Pair Corralation between United States and Newmont

Assuming the 90 days trading horizon United States Steel is expected to generate 2.6 times more return on investment than Newmont. However, United States is 2.6 times more volatile than Newmont. It trades about 0.24 of its potential returns per unit of risk. Newmont is currently generating about 0.3 per unit of risk. If you would invest  2,990  in United States Steel on October 26, 2024 and sell it today you would earn a total of  502.00  from holding United States Steel or generate 16.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

United States Steel  vs.  Newmont

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, United States is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Newmont

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newmont has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with United States and Newmont

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

The idea behind United States Steel and Newmont 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.