Correlation Between Fresnillo PLC and Silver Scott

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

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

Diversification Opportunities for Fresnillo PLC and Silver Scott

0.65

Correlation Coefficient

Fresnillo PLC  Silver Scott

Poor diversification

The 3 months correlation between Fresnillo and Silver is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Fresnillo PLC and Silver Scott Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Scott Mines and Fresnillo PLC 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 Fresnillo PLC are associated (or correlated) with Silver Scott. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Scott Mines has no effect on the direction of Fresnillo PLC i.e., Fresnillo PLC and Silver Scott go up and down completely randomly.

Pair Corralation between Fresnillo PLC and Silver Scott

Assuming the 90 days horizon Fresnillo PLC is expected to under-perform the Silver Scott. But the pink sheet apears to be less risky and, when comparing its historical volatility, Fresnillo PLC is 5.69 times less risky than Silver Scott. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Silver Scott Mines is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  1.73  in Silver Scott Mines on October 13, 2024 and sell it today you would earn a total of  1.01  from holding Silver Scott Mines or generate 58.38% return on investment over 90 days.

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

Fresnillo PLC  vs.  Silver Scott Mines

Fresnillo PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fresnillo PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fresnillo PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Silver Scott Mines

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Silver Scott Mines are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, Silver Scott unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fresnillo PLC and Silver Scott

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

The idea behind Fresnillo PLC and Silver Scott Mines 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.