Correlation Between Discovery Silver and Western Investment

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

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

Diversification Opportunities for Discovery Silver and Western Investment

0.38

Correlation Coefficient

Discovery Silver  Western Investment

Weak diversification

The 3 months correlation between Discovery and Western is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Discovery Silver Corp and Western Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Investment and Discovery 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 Discovery Silver Corp are associated (or correlated) with Western Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Investment has no effect on the direction of Discovery Silver i.e., Discovery Silver and Western Investment go up and down completely randomly.

Pair Corralation between Discovery Silver and Western Investment

Assuming the 90 days trading horizon Discovery Silver Corp is expected to generate 1.99 times more return on investment than Western Investment. However, Discovery Silver is 1.99 times more volatile than Western Investment. It trades about 0.33 of its potential returns per unit of risk. Western Investment is currently generating about 0.05 per unit of risk. If you would invest  70.00  in Discovery Silver Corp on December 22, 2024 and sell it today you would earn a total of  134.00  from holding Discovery Silver Corp or generate 191.43% return on investment over 90 days.

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

Discovery Silver Corp  vs.  Western Investment

Discovery Silver Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Discovery Silver Corp are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Discovery Silver displayed solid returns over the last few months and may actually be approaching a breakup point.

Western Investment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Investment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Western Investment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Discovery Silver and Western Investment

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

The idea behind Discovery Silver Corp and Western Investment 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.