Correlation Between Gatos Silver and Pentagon I

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

By analyzing existing cross correlation between Gatos Silver and Pentagon I Capital, you can compare the effects of market volatilities on Gatos Silver and Pentagon I 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 Pentagon I. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gatos Silver and Pentagon I.

Diversification Opportunities for Gatos Silver and Pentagon I

0.23

Correlation Coefficient

Gatos Silver  Pentagon I

Modest diversification

The 3 months correlation between Gatos and Pentagon is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Gatos Silver and Pentagon I Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentagon I Capital 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 Pentagon I. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentagon I Capital has no effect on the direction of Gatos Silver i.e., Gatos Silver and Pentagon I go up and down completely randomly.

Pair Corralation between Gatos Silver and Pentagon I

Assuming the 90 days trading horizon Gatos Silver is expected to generate 0.47 times more return on investment than Pentagon I. However, Gatos Silver is 2.12 times less risky than Pentagon I. It trades about 0.01 of its potential returns per unit of risk. Pentagon I Capital is currently generating about -0.1 per unit of risk. If you would invest  2,057  in Gatos Silver on September 22, 2024 and sell it today you would lose (67.00) from holding Gatos Silver or give up 3.26% of portfolio value over 90 days.

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

Gatos Silver  vs.  Pentagon I Capital

Gatos Silver

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pentagon I Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pentagon I Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Gatos Silver and Pentagon I

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

The idea behind Gatos Silver and Pentagon I Capital 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.