Correlation Between Gatos Silver and UPS CDR

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

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

Diversification Opportunities for Gatos Silver and UPS CDR

0.53

Correlation Coefficient

Gatos Silver  UPS CDR

Very weak diversification

The 3 months correlation between Gatos and UPS is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Gatos Silver and UPS CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPS CDR 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 UPS CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UPS CDR has no effect on the direction of Gatos Silver i.e., Gatos Silver and UPS CDR go up and down completely randomly.

Pair Corralation between Gatos Silver and UPS CDR

Assuming the 90 days trading horizon Gatos Silver is expected to under-perform the UPS CDR. In addition to that, Gatos Silver is 2.08 times more volatile than UPS CDR. It trades about -0.09 of its total potential returns per unit of risk. UPS CDR is currently generating about -0.03 per unit of volatility. If you would invest  1,720  in UPS CDR on September 5, 2024 and sell it today you would lose (22.00) from holding UPS CDR or give up 1.28% of portfolio value over 90 days.

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

Gatos Silver  vs.  UPS CDR

Gatos Silver

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gatos Silver are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Gatos Silver displayed solid returns over the last few months and may actually be approaching a breakup point.

UPS CDR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UPS CDR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, UPS CDR is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Gatos Silver and UPS CDR

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

The idea behind Gatos Silver and UPS CDR 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.