Correlation Between Aluminumof China and Gatos Silver

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

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

Diversification Opportunities for Aluminumof China and Gatos Silver

0.64

Correlation Coefficient

Aluminumof China  Gatos Silver

Poor diversification

The 3 months correlation between Aluminumof and Gatos is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Gatos Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gatos Silver and Aluminumof China 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 Aluminum of are associated (or correlated) with Gatos Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gatos Silver has no effect on the direction of Aluminumof China i.e., Aluminumof China and Gatos Silver go up and down completely randomly.

Pair Corralation between Aluminumof China and Gatos Silver

Assuming the 90 days horizon Aluminum of is expected to generate 1.04 times more return on investment than Gatos Silver. However, Aluminumof China is 1.04 times more volatile than Gatos Silver. It trades about 0.04 of its potential returns per unit of risk. Gatos Silver is currently generating about -0.04 per unit of risk. If you would invest  61.00  in Aluminum of on October 26, 2024 and sell it today you would earn a total of  2.00  from holding Aluminum of or generate 3.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	89.74%
Values	Daily Returns

Aluminum of  vs.  Gatos Silver

Aluminumof China

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aluminum of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Gatos Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gatos Silver has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Aluminumof China and Gatos Silver

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

The idea behind Aluminum of and Gatos Silver 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.