Correlation Between Cemex SAB and Commercial Metals

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

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

Diversification Opportunities for Cemex SAB and Commercial Metals

0.76

Correlation Coefficient

Cemex SAB  Commercial Metals

Poor diversification

The 3 months correlation between Cemex and Commercial is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Cemex SAB de and Commercial Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commercial Metals and Cemex SAB 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 Cemex SAB de are associated (or correlated) with Commercial Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commercial Metals has no effect on the direction of Cemex SAB i.e., Cemex SAB and Commercial Metals go up and down completely randomly.

Pair Corralation between Cemex SAB and Commercial Metals

Allowing for the 90-day total investment horizon Cemex SAB de is expected to generate 1.04 times more return on investment than Commercial Metals. However, Cemex SAB is 1.04 times more volatile than Commercial Metals. It trades about -0.02 of its potential returns per unit of risk. Commercial Metals is currently generating about -0.06 per unit of risk. If you would invest  596.00  in Cemex SAB de on January 24, 2025 and sell it today you would lose (35.00) from holding Cemex SAB de or give up 5.87% of portfolio value over 90 days.

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

Cemex SAB de  vs.  Commercial Metals

Cemex SAB de

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cemex SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Cemex SAB is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Commercial Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Commercial Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Cemex SAB and Commercial Metals

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

The idea behind Cemex SAB de and Commercial 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.