Correlation Between Gatos Silver and Summit Materials

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

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

Diversification Opportunities for Gatos Silver and Summit Materials

-0.4

Correlation Coefficient

Gatos Silver  Summit Materials

Very good diversification

The 3 months correlation between Gatos and Summit is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Gatos Silver and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials 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 Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of Gatos Silver i.e., Gatos Silver and Summit Materials go up and down completely randomly.

Pair Corralation between Gatos Silver and Summit Materials

Given the investment horizon of 90 days Gatos Silver is expected to generate 1.97 times more return on investment than Summit Materials. However, Gatos Silver is 1.97 times more volatile than Summit Materials. It trades about 0.11 of its potential returns per unit of risk. Summit Materials is currently generating about 0.09 per unit of risk. If you would invest  610.00  in Gatos Silver on October 9, 2024 and sell it today you would earn a total of  898.00  from holding Gatos Silver or generate 147.21% return on investment over 90 days.

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

Gatos Silver  vs.  Summit Materials

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.

Summit Materials

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Summit Materials displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gatos Silver and Summit Materials

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

The idea behind Gatos Silver and Summit Materials 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .