Correlation Between Andean Silver and Southern Cross

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

Diversification Opportunities for Andean Silver and Southern Cross

0.28

Correlation Coefficient

Andean Silver  Southern Cross

Modest diversification

The 3 months correlation between Andean and Southern is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Andean Silver Limited and Southern Cross Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Cross Gold 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 Southern Cross. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Cross Gold has no effect on the direction of Andean Silver i.e., Andean Silver and Southern Cross go up and down completely randomly.

Pair Corralation between Andean Silver and Southern Cross

Assuming the 90 days trading horizon Andean Silver Limited is expected to under-perform the Southern Cross. But the stock apears to be less risky and, when comparing its historical volatility, Andean Silver Limited is 1.13 times less risky than Southern Cross. The stock trades about -0.04 of its potential returns per unit of risk. The Southern Cross Gold is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  275.00  in Southern Cross Gold on September 16, 2024 and sell it today you would earn a total of  113.00  from holding Southern Cross Gold or generate 41.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.97%
Values	Daily Returns

Andean Silver Limited  vs.  Southern Cross Gold

Andean Silver Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Andean Silver Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Southern Cross Gold

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Cross Gold are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Southern Cross unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Andean Silver and Southern Cross

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

The idea behind Andean Silver Limited and Southern Cross Gold 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.