Correlation Between Pan American and Constellium

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

By analyzing existing cross correlation between Pan American Silver and Constellium Nv, you can compare the effects of market volatilities on Pan American and Constellium 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 Pan American with a short position of Constellium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan American and Constellium.

Diversification Opportunities for Pan American and Constellium

0.39

Correlation Coefficient

Pan American  Constellium

Weak diversification

The 3 months correlation between Pan and Constellium is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Pan American Silver and Constellium Nv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellium Nv and Pan American 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 Pan American Silver are associated (or correlated) with Constellium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellium Nv has no effect on the direction of Pan American i.e., Pan American and Constellium go up and down completely randomly.

Pair Corralation between Pan American and Constellium

Given the investment horizon of 90 days Pan American Silver is expected to generate 2.5 times more return on investment than Constellium. However, Pan American is 2.5 times more volatile than Constellium Nv. It trades about 0.26 of its potential returns per unit of risk. Constellium Nv is currently generating about 0.3 per unit of risk. If you would invest  1,848  in Pan American Silver on March 2, 2024 and sell it today you would earn a total of  375.00  from holding Pan American Silver or generate 20.29% return on investment over 90 days.

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

Pan American Silver  vs.  Constellium Nv

Pan American Silver

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pan American Silver are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Pan American unveiled solid returns over the last few months and may actually be approaching a breakup point.

Constellium Nv

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Constellium Nv are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Constellium may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Pan American and Constellium

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

The idea behind Pan American Silver and Constellium Nv 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.