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

0.88

Correlation Coefficient

Fortuna Silver  SilverCrest Metals

Very poor diversification

The 3 months correlation between Fortuna and SilverCrest is 0.88. 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

Assuming the 90 days trading horizon Fortuna Silver is expected to generate 1.41 times less return on investment than SilverCrest Metals. But when comparing it to its historical volatility, Fortuna Silver Mines is 1.02 times less risky than SilverCrest Metals. It trades about 0.05 of its potential returns per unit of risk. SilverCrest Metals is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  755.00  in SilverCrest Metals on November 20, 2024 and sell it today you would earn a total of  746.00  from holding SilverCrest Metals or generate 98.81% 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.  SilverCrest Metals

Fortuna Silver Mines

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fortuna Silver Mines are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Fortuna Silver may actually be approaching a critical reversion point that can send shares even higher in March 2025.

SilverCrest Metals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SilverCrest Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, SilverCrest Metals may actually be approaching a critical reversion point that can send shares even higher in March 2025.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.