Correlation Between Fortuna Silver and Pan American

Can any of the company-specific risk be diversified away by investing in both Fortuna Silver and Pan American 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 Pan American 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 Pan American Silver, you can compare the effects of market volatilities on Fortuna Silver and Pan American 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 Pan American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortuna Silver and Pan American.

Diversification Opportunities for Fortuna Silver and Pan American

0.81

Correlation Coefficient

Fortuna Silver  Pan American

Very poor diversification

The 3 months correlation between Fortuna and Pan is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Fortuna Silver Mines and Pan American Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan American Silver 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 Pan American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan American Silver has no effect on the direction of Fortuna Silver i.e., Fortuna Silver and Pan American go up and down completely randomly.

Pair Corralation between Fortuna Silver and Pan American

Considering the 90-day investment horizon Fortuna Silver Mines is expected to generate 1.4 times more return on investment than Pan American. However, Fortuna Silver is 1.4 times more volatile than Pan American Silver. It trades about 0.2 of its potential returns per unit of risk. Pan American Silver is currently generating about 0.2 per unit of risk. If you would invest  421.00  in Fortuna Silver Mines on December 28, 2024 and sell it today you would earn a total of  203.00  from holding Fortuna Silver Mines or generate 48.22% return on investment over 90 days.

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

Fortuna Silver Mines  vs.  Pan American Silver

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 15 (%) 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.

Pan American Silver

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pan American Silver are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Pan American unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortuna Silver and Pan American

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

The idea behind Fortuna Silver Mines and Pan American 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.