Correlation Between Fortuna Silver and Central Japan

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

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

Diversification Opportunities for Fortuna Silver and Central Japan

0.32

Correlation Coefficient

Fortuna Silver  Central Japan

Weak diversification

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

Pair Corralation between Fortuna Silver and Central Japan

Considering the 90-day investment horizon Fortuna Silver Mines is expected to generate 2.46 times more return on investment than Central Japan. However, Fortuna Silver is 2.46 times more volatile than Central Japan Railway. It trades about 0.17 of its potential returns per unit of risk. Central Japan Railway is currently generating about 0.09 per unit of risk. If you would invest  441.00  in Fortuna Silver Mines on December 26, 2024 and sell it today you would earn a total of  170.00  from holding Fortuna Silver Mines or generate 38.55% return on investment over 90 days.

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

Fortuna Silver Mines  vs.  Central Japan Railway

Fortuna Silver Mines

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fortuna Silver Mines are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Fortuna Silver displayed solid returns over the last few months and may actually be approaching a breakup point.

Central Japan Railway

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Central Japan Railway are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Central Japan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Fortuna Silver and Central Japan

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

The idea behind Fortuna Silver Mines and Central Japan Railway 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.