Correlation Between Gatos Silver and Solaris Resources

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

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

Diversification Opportunities for Gatos Silver and Solaris Resources

-0.67

Correlation Coefficient

Gatos Silver  Solaris Resources

Excellent diversification

The 3 months correlation between Gatos and Solaris is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Gatos Silver and Solaris Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solaris Resources 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 Solaris Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solaris Resources has no effect on the direction of Gatos Silver i.e., Gatos Silver and Solaris Resources go up and down completely randomly.

Pair Corralation between Gatos Silver and Solaris Resources

Given the investment horizon of 90 days Gatos Silver is expected to generate 2.99 times less return on investment than Solaris Resources. But when comparing it to its historical volatility, Gatos Silver is 1.13 times less risky than Solaris Resources. It trades about 0.08 of its potential returns per unit of risk. Solaris Resources is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  317.00  in Solaris Resources on October 23, 2024 and sell it today you would earn a total of  42.00  from holding Solaris Resources or generate 13.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	88.89%
Values	Daily Returns

Gatos Silver  vs.  Solaris Resources

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 conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Solaris Resources

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Solaris Resources are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Solaris Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gatos Silver and Solaris Resources

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

The idea behind Gatos Silver and Solaris Resources 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.