Correlation Between Gatos Silver and Monument Mining

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

By analyzing existing cross correlation between Gatos Silver and Monument Mining Limited, you can compare the effects of market volatilities on Gatos Silver and Monument Mining 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 Gatos Silver with a short position of Monument Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gatos Silver and Monument Mining.

Diversification Opportunities for Gatos Silver and Monument Mining

0.55

Correlation Coefficient

Gatos Silver  Monument Mining

Very weak diversification

The 3 months correlation between Gatos and Monument is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Gatos Silver and Monument Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monument Mining and Gatos 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 Gatos Silver are associated (or correlated) with Monument Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monument Mining has no effect on the direction of Gatos Silver i.e., Gatos Silver and Monument Mining go up and down completely randomly.

Pair Corralation between Gatos Silver and Monument Mining

Assuming the 90 days trading horizon Gatos Silver is expected to under-perform the Monument Mining. But the stock apears to be less risky and, when comparing its historical volatility, Gatos Silver is 1.19 times less risky than Monument Mining. The stock trades about -0.06 of its potential returns per unit of risk. The Monument Mining Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Monument Mining Limited on September 17, 2024 and sell it today you would earn a total of  0.00  from holding Monument Mining Limited or generate 0.0% return on investment over 90 days.

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

Gatos Silver  vs.  Monument Mining Limited

Gatos Silver

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gatos Silver are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Gatos Silver may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Monument Mining

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monument Mining Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Monument Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gatos Silver and Monument Mining

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

The idea behind Gatos Silver and Monument Mining Limited 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.