Correlation Between Dolly Varden and Silver Mines

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

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

Diversification Opportunities for Dolly Varden and Silver Mines

0.48

Correlation Coefficient

Dolly Varden  Silver Mines

Very weak diversification

The 3 months correlation between Dolly and Silver is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Dolly Varden Silver and Silver Mines Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Mines Limited and Dolly Varden 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 Dolly Varden Silver are associated (or correlated) with Silver Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Mines Limited has no effect on the direction of Dolly Varden i.e., Dolly Varden and Silver Mines go up and down completely randomly.

Pair Corralation between Dolly Varden and Silver Mines

Assuming the 90 days trading horizon Dolly Varden is expected to generate 1.28 times less return on investment than Silver Mines. In addition to that, Dolly Varden is 1.07 times more volatile than Silver Mines Limited. It trades about 0.06 of its total potential returns per unit of risk. Silver Mines Limited is currently generating about 0.08 per unit of volatility. If you would invest  4.96  in Silver Mines Limited on December 21, 2024 and sell it today you would earn a total of  1.09  from holding Silver Mines Limited or generate 21.98% return on investment over 90 days.

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

Dolly Varden Silver  vs.  Silver Mines Limited

Dolly Varden Silver

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dolly Varden Silver are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Dolly Varden reported solid returns over the last few months and may actually be approaching a breakup point.

Silver Mines Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Silver Mines Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Silver Mines reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dolly Varden and Silver Mines

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

The idea behind Dolly Varden Silver and Silver Mines 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.

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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 Anywhere module to track or share privately all of your investments from the convenience of any device.