Correlation Between Gatos Silver and Hecla Mining

Can any of the company-specific risk be diversified away by investing in both Gatos Silver and Hecla 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 Hecla 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 Hecla Mining, you can compare the effects of market volatilities on Gatos Silver and Hecla 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 Hecla Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gatos Silver and Hecla Mining.

Diversification Opportunities for Gatos Silver and Hecla Mining

0.39

Correlation Coefficient

Gatos Silver  Hecla Mining

Weak diversification

The 3 months correlation between Gatos and Hecla is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Gatos Silver and Hecla Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hecla 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 Hecla Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hecla Mining has no effect on the direction of Gatos Silver i.e., Gatos Silver and Hecla Mining go up and down completely randomly.

Pair Corralation between Gatos Silver and Hecla Mining

Given the investment horizon of 90 days Gatos Silver is expected to generate 4.19 times more return on investment than Hecla Mining. However, Gatos Silver is 4.19 times more volatile than Hecla Mining. It trades about 0.08 of its potential returns per unit of risk. Hecla Mining is currently generating about 0.01 per unit of risk. If you would invest  1,025  in Gatos Silver on September 30, 2024 and sell it today you would earn a total of  384.00  from holding Gatos Silver or generate 37.46% return on investment over 90 days.

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

Gatos Silver  vs.  Hecla Mining

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.

Hecla Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hecla Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hecla Mining is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gatos Silver and Hecla Mining

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

The idea behind Gatos Silver and Hecla Mining 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.