Correlation Between Gatos Silver and Vulcan Materials

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

Diversification Opportunities for Gatos Silver and Vulcan Materials

-0.1

Correlation Coefficient

Gatos Silver  Vulcan Materials

Good diversification

The 3 months correlation between Gatos and Vulcan is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Gatos Silver and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan 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 Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of Gatos Silver i.e., Gatos Silver and Vulcan Materials go up and down completely randomly.

Pair Corralation between Gatos Silver and Vulcan Materials

Given the investment horizon of 90 days Gatos Silver is expected to generate 3.09 times more return on investment than Vulcan Materials. However, Gatos Silver is 3.09 times more volatile than Vulcan Materials. It trades about -0.09 of its potential returns per unit of risk. Vulcan Materials is currently generating about -0.34 per unit of risk. If you would invest  1,614  in Gatos Silver on October 11, 2024 and sell it today you would lose (118.00) from holding Gatos Silver or give up 7.31% of portfolio value over 90 days.

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

Gatos Silver  vs.  Vulcan 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.

Vulcan Materials

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Vulcan Materials is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Gatos Silver and Vulcan Materials

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

The idea behind Gatos Silver and Vulcan 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.