Correlation Between Adriatic Metals and Silver Dollar

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

By analyzing existing cross correlation between Adriatic Metals PLC and Silver Dollar Resources, you can compare the effects of market volatilities on Adriatic Metals and Silver Dollar 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 Adriatic Metals with a short position of Silver Dollar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adriatic Metals and Silver Dollar.

Diversification Opportunities for Adriatic Metals and Silver Dollar

0.82

Correlation Coefficient

Adriatic Metals  Silver Dollar

Very poor diversification

The 3 months correlation between Adriatic and Silver is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Adriatic Metals PLC and Silver Dollar Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Dollar Resources and Adriatic 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 Adriatic Metals PLC are associated (or correlated) with Silver Dollar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Dollar Resources has no effect on the direction of Adriatic Metals i.e., Adriatic Metals and Silver Dollar go up and down completely randomly.

Pair Corralation between Adriatic Metals and Silver Dollar

Assuming the 90 days horizon Adriatic Metals is expected to generate 1.31 times less return on investment than Silver Dollar. But when comparing it to its historical volatility, Adriatic Metals PLC is 1.75 times less risky than Silver Dollar. It trades about 0.03 of its potential returns per unit of risk. Silver Dollar Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  26.00  in Silver Dollar Resources on September 4, 2024 and sell it today you would lose (2.00) from holding Silver Dollar Resources or give up 7.69% of portfolio value over 90 days.

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

Adriatic Metals PLC  vs.  Silver Dollar Resources

Adriatic Metals PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adriatic Metals PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Adriatic Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Silver Dollar Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Silver Dollar Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Silver Dollar reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adriatic Metals and Silver Dollar

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

The idea behind Adriatic Metals PLC and Silver Dollar Resources 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.