Correlation Between Equity Metals and Guanajuato Silver

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

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

Diversification Opportunities for Equity Metals and Guanajuato Silver

0.57

Correlation Coefficient

Equity Metals  Guanajuato Silver

Very weak diversification

The 3 months correlation between Equity and Guanajuato is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Equity Metals Corp and Guanajuato Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guanajuato Silver and Equity 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 Equity Metals Corp are associated (or correlated) with Guanajuato Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guanajuato Silver has no effect on the direction of Equity Metals i.e., Equity Metals and Guanajuato Silver go up and down completely randomly.

Pair Corralation between Equity Metals and Guanajuato Silver

Assuming the 90 days trading horizon Equity Metals Corp is expected to generate 1.3 times more return on investment than Guanajuato Silver. However, Equity Metals is 1.3 times more volatile than Guanajuato Silver. It trades about 0.08 of its potential returns per unit of risk. Guanajuato Silver is currently generating about 0.04 per unit of risk. If you would invest  17.00  in Equity Metals Corp on December 30, 2024 and sell it today you would earn a total of  4.00  from holding Equity Metals Corp or generate 23.53% return on investment over 90 days.

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

Equity Metals Corp  vs.  Guanajuato Silver

Equity Metals Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Equity Metals Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Equity Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Guanajuato Silver

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guanajuato Silver are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Guanajuato Silver showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equity Metals and Guanajuato Silver

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

The idea behind Equity Metals Corp and Guanajuato Silver 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.