Correlation Between Future Metals and SilverCrest Metals

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

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

Diversification Opportunities for Future Metals and SilverCrest Metals

-0.32

Correlation Coefficient

Future Metals  SilverCrest Metals

Very good diversification

The 3 months correlation between Future and SilverCrest is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Future Metals NL and SilverCrest Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SilverCrest Metals and Future 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 Future Metals NL are associated (or correlated) with SilverCrest Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SilverCrest Metals has no effect on the direction of Future Metals i.e., Future Metals and SilverCrest Metals go up and down completely randomly.

Pair Corralation between Future Metals and SilverCrest Metals

Assuming the 90 days trading horizon Future Metals NL is expected to under-perform the SilverCrest Metals. But the stock apears to be less risky and, when comparing its historical volatility, Future Metals NL is 1.73 times less risky than SilverCrest Metals. The stock trades about -0.03 of its potential returns per unit of risk. The SilverCrest Metals is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,395  in SilverCrest Metals on December 2, 2024 and sell it today you would earn a total of  220.00  from holding SilverCrest Metals or generate 15.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	22.22%
Values	Daily Returns

Future Metals NL  vs.  SilverCrest Metals

Future Metals NL

Risk-Adjusted Performance

Very Weak

Over the last 90 days Future Metals NL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

SilverCrest Metals

Risk-Adjusted Performance

Good

Over the last 90 days SilverCrest Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, SilverCrest Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Future Metals and SilverCrest Metals

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

The idea behind Future Metals NL and SilverCrest Metals 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.