Correlation Between Silvercorp Metals and American Homes

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

By analyzing existing cross correlation between Silvercorp Metals and American Homes 4, you can compare the effects of market volatilities on Silvercorp Metals and American Homes 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 Silvercorp Metals with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silvercorp Metals and American Homes.

Diversification Opportunities for Silvercorp Metals and American Homes

0.07

Correlation Coefficient

Silvercorp Metals  American Homes

Significant diversification

The 3 months correlation between Silvercorp and American is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Silvercorp Metals and American Homes 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Homes 4 and Silvercorp 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 Silvercorp Metals are associated (or correlated) with American Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Homes 4 has no effect on the direction of Silvercorp Metals i.e., Silvercorp Metals and American Homes go up and down completely randomly.

Pair Corralation between Silvercorp Metals and American Homes

Assuming the 90 days trading horizon Silvercorp Metals is expected to generate 2.68 times more return on investment than American Homes. However, Silvercorp Metals is 2.68 times more volatile than American Homes 4. It trades about 0.04 of its potential returns per unit of risk. American Homes 4 is currently generating about 0.03 per unit of risk. If you would invest  361.00  in Silvercorp Metals on October 5, 2024 and sell it today you would earn a total of  79.00  from holding Silvercorp Metals or generate 21.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.91%
Values	Daily Returns

Silvercorp Metals  vs.  American Homes 4

Silvercorp Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Silvercorp Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

American Homes 4

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Homes 4 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, American Homes is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Silvercorp Metals and American Homes

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

The idea behind Silvercorp Metals and American Homes 4 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.