Correlation Between Andean Silver and Polarx

Can any of the company-specific risk be diversified away by investing in both Andean Silver and Polarx 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 Polarx 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 Polarx, you can compare the effects of market volatilities on Andean Silver and Polarx 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 Polarx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Andean Silver and Polarx.

Diversification Opportunities for Andean Silver and Polarx

0.49

Correlation Coefficient

Andean Silver  Polarx

Very weak diversification

The 3 months correlation between Andean and Polarx is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Andean Silver Limited and Polarx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polarx 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 Polarx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polarx has no effect on the direction of Andean Silver i.e., Andean Silver and Polarx go up and down completely randomly.

Pair Corralation between Andean Silver and Polarx

Assuming the 90 days trading horizon Andean Silver is expected to generate 1.11 times less return on investment than Polarx. But when comparing it to its historical volatility, Andean Silver Limited is 1.78 times less risky than Polarx. It trades about 0.16 of its potential returns per unit of risk. Polarx is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.60  in Polarx on December 21, 2024 and sell it today you would earn a total of  0.20  from holding Polarx or generate 33.33% return on investment over 90 days.

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

Andean Silver Limited  vs.  Polarx

Andean Silver Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Andean Silver Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Andean Silver unveiled solid returns over the last few months and may actually be approaching a breakup point.

Polarx

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Polarx are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Polarx unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Andean Silver and Polarx

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

The idea behind Andean Silver Limited and Polarx 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.