Correlation Between Compania and McEwen Mining

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

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

Diversification Opportunities for Compania and McEwen Mining

0.47

Correlation Coefficient

Compania  McEwen Mining

Very weak diversification

The 3 months correlation between Compania and McEwen is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Minas and McEwen Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McEwen Mining and Compania 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 Compania de Minas 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 Compania i.e., Compania and McEwen Mining go up and down completely randomly.

Pair Corralation between Compania and McEwen Mining

Considering the 90-day investment horizon Compania is expected to generate 25.92 times less return on investment than McEwen Mining. But when comparing it to its historical volatility, Compania de Minas is 1.96 times less risky than McEwen Mining. It trades about 0.03 of its potential returns per unit of risk. McEwen Mining is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  620.00  in McEwen Mining on January 24, 2024 and sell it today you would earn a total of  467.00  from holding McEwen Mining or generate 75.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Compania de Minas  vs.  McEwen Mining

Compania de Minas

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Minas are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Compania may actually be approaching a critical reversion point that can send shares even higher in May 2024.

McEwen Mining

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in McEwen Mining are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, McEwen Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compania and McEwen Mining

The main advantage of trading using opposite Compania and McEwen Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania 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 Compania de Minas 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.