Correlation Between SIERRA METALS and GMO Internet

Can any of the company-specific risk be diversified away by investing in both SIERRA METALS and GMO Internet 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 SIERRA METALS and GMO Internet into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SIERRA METALS and GMO Internet, you can compare the effects of market volatilities on SIERRA METALS and GMO Internet 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 SIERRA METALS with a short position of GMO Internet. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIERRA METALS and GMO Internet.

Diversification Opportunities for SIERRA METALS and GMO Internet

-0.21

Correlation Coefficient

SIERRA METALS  GMO Internet

Very good diversification

The 3 months correlation between SIERRA and GMO is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding SIERRA METALS and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet and SIERRA 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 SIERRA METALS are associated (or correlated) with GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of SIERRA METALS i.e., SIERRA METALS and GMO Internet go up and down completely randomly.

Pair Corralation between SIERRA METALS and GMO Internet

Assuming the 90 days trading horizon SIERRA METALS is expected to generate 1.8 times more return on investment than GMO Internet. However, SIERRA METALS is 1.8 times more volatile than GMO Internet. It trades about 0.26 of its potential returns per unit of risk. GMO Internet is currently generating about -0.06 per unit of risk. If you would invest  48.00  in SIERRA METALS on October 7, 2024 and sell it today you would earn a total of  6.00  from holding SIERRA METALS or generate 12.5% return on investment over 90 days.

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

SIERRA METALS  vs.  GMO Internet

SIERRA METALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIERRA METALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SIERRA METALS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

GMO Internet

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GMO Internet may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SIERRA METALS and GMO Internet

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

The idea behind SIERRA METALS and GMO Internet 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.