Correlation Between Fortuna Silver and SilverCrest Metals

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

Diversification Opportunities for Fortuna Silver and SilverCrest Metals

0.17

Correlation Coefficient

Fortuna Silver  SilverCrest Metals

Average diversification

The 3 months correlation between Fortuna and SilverCrest is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Fortuna Silver Mines and SilverCrest Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SilverCrest Metals 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 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 Fortuna Silver i.e., Fortuna Silver and SilverCrest Metals go up and down completely randomly.

Pair Corralation between Fortuna Silver and SilverCrest Metals

Considering the 90-day investment horizon Fortuna Silver Mines is expected to under-perform the SilverCrest Metals. In addition to that, Fortuna Silver is 1.03 times more volatile than SilverCrest Metals. It trades about -0.02 of its total potential returns per unit of risk. SilverCrest Metals is currently generating about 0.09 per unit of volatility. If you would invest  1,017  in SilverCrest Metals on November 29, 2024 and sell it today you would earn a total of  138.00  from holding SilverCrest Metals or generate 13.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	88.14%
Values	Daily Returns

Fortuna Silver Mines  vs.  SilverCrest Metals

Fortuna Silver Mines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fortuna Silver Mines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Fortuna Silver is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

SilverCrest Metals

Risk-Adjusted Performance

Modest

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

Pair Trading with Fortuna Silver and SilverCrest Metals

The main advantage of trading using opposite Fortuna Silver and SilverCrest Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortuna Silver 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 Fortuna Silver Mines 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.