Correlation Between Fortuna Silver and Liberty Gold

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

Diversification Opportunities for Fortuna Silver and Liberty Gold

0.69

Correlation Coefficient

Fortuna Silver  Liberty Gold

Poor diversification

The 3 months correlation between Fortuna and Liberty is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Fortuna Silver Mines and Liberty Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Gold Corp 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 Liberty Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Gold Corp has no effect on the direction of Fortuna Silver i.e., Fortuna Silver and Liberty Gold go up and down completely randomly.

Pair Corralation between Fortuna Silver and Liberty Gold

Assuming the 90 days trading horizon Fortuna Silver Mines is expected to generate 0.86 times more return on investment than Liberty Gold. However, Fortuna Silver Mines is 1.17 times less risky than Liberty Gold. It trades about 0.18 of its potential returns per unit of risk. Liberty Gold Corp is currently generating about 0.12 per unit of risk. If you would invest  604.00  in Fortuna Silver Mines on December 30, 2024 and sell it today you would earn a total of  272.00  from holding Fortuna Silver Mines or generate 45.03% return on investment over 90 days.

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

Fortuna Silver Mines  vs.  Liberty Gold Corp

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 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Fortuna Silver displayed solid returns over the last few months and may actually be approaching a breakup point.

Liberty Gold Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Gold Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Liberty Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortuna Silver and Liberty Gold

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

The idea behind Fortuna Silver Mines and Liberty Gold Corp 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.