Correlation Between Gatos Silver and Defiance Silver

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

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

Diversification Opportunities for Gatos Silver and Defiance Silver

0.93

Correlation Coefficient

Gatos Silver  Defiance Silver

Almost no diversification

The 3 months correlation between Gatos and Defiance is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Gatos Silver and Defiance Silver Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance Silver Corp 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 Defiance Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance Silver Corp has no effect on the direction of Gatos Silver i.e., Gatos Silver and Defiance Silver go up and down completely randomly.

Pair Corralation between Gatos Silver and Defiance Silver

Given the investment horizon of 90 days Gatos Silver is expected to under-perform the Defiance Silver. But the stock apears to be less risky and, when comparing its historical volatility, Gatos Silver is 1.91 times less risky than Defiance Silver. The stock trades about -0.14 of its potential returns per unit of risk. The Defiance Silver Corp is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Defiance Silver Corp on October 8, 2024 and sell it today you would lose (2.00) from holding Defiance Silver Corp or give up 11.76% of portfolio value over 90 days.

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

Gatos Silver  vs.  Defiance Silver Corp

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.

Defiance Silver Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Defiance Silver Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Gatos Silver and Defiance Silver

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

The idea behind Gatos Silver and Defiance Silver 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.