Correlation Between Gatos Silver and GMO Internet

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

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

Diversification Opportunities for Gatos Silver and GMO Internet

-0.18

Correlation Coefficient

Gatos Silver  GMO Internet

Good diversification

The 3 months correlation between Gatos and GMO is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Gatos Silver and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet 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 GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of Gatos Silver i.e., Gatos Silver and GMO Internet go up and down completely randomly.

Pair Corralation between Gatos Silver and GMO Internet

Given the investment horizon of 90 days Gatos Silver is expected to generate 4.77 times less return on investment than GMO Internet. But when comparing it to its historical volatility, Gatos Silver is 4.47 times less risky than GMO Internet. It trades about 0.08 of its potential returns per unit of risk. GMO Internet is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,156  in GMO Internet on October 10, 2024 and sell it today you would earn a total of  524.00  from holding GMO Internet or generate 45.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.08%
Values	Daily Returns

Gatos Silver  vs.  GMO Internet

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.

GMO Internet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GMO Internet has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, GMO Internet is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Gatos Silver and GMO Internet

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

The idea behind Gatos Silver and GMO Internet 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.