Correlation Between Andean Silver and Energy Technologies

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

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

Diversification Opportunities for Andean Silver and Energy Technologies

-0.23

Correlation Coefficient

Andean Silver  Energy Technologies

Very good diversification

The 3 months correlation between Andean and Energy is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Andean Silver Limited and Energy Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Technologies and Andean Silver 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 Andean Silver Limited are associated (or correlated) with Energy Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Technologies has no effect on the direction of Andean Silver i.e., Andean Silver and Energy Technologies go up and down completely randomly.

Pair Corralation between Andean Silver and Energy Technologies

Assuming the 90 days trading horizon Andean Silver Limited is expected to generate 1.84 times more return on investment than Energy Technologies. However, Andean Silver is 1.84 times more volatile than Energy Technologies Limited. It trades about 0.09 of its potential returns per unit of risk. Energy Technologies Limited is currently generating about -0.03 per unit of risk. If you would invest  24.00  in Andean Silver Limited on December 2, 2024 and sell it today you would earn a total of  74.00  from holding Andean Silver Limited or generate 308.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.4%
Values	Daily Returns

Andean Silver Limited  vs.  Energy Technologies Limited

Andean Silver Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Andean Silver Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Andean Silver is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Energy Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Technologies Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Energy Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Andean Silver and Energy Technologies

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

The idea behind Andean Silver Limited and Energy Technologies Limited 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.