Correlation Between VanEck Gold and Pan American

Can any of the company-specific risk be diversified away by investing in both VanEck Gold and Pan American 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 VanEck Gold and Pan American into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VanEck Gold Miners and Pan American Silver, you can compare the effects of market volatilities on VanEck Gold and Pan American 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 VanEck Gold with a short position of Pan American. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Gold and Pan American.

Diversification Opportunities for VanEck Gold and Pan American

0.68

Correlation Coefficient

VanEck Gold  Pan American

Poor diversification

The 3 months correlation between VanEck and Pan is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Gold Miners and Pan American Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan American Silver and VanEck Gold 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 VanEck Gold Miners are associated (or correlated) with Pan American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan American Silver has no effect on the direction of VanEck Gold i.e., VanEck Gold and Pan American go up and down completely randomly.

Pair Corralation between VanEck Gold and Pan American

Considering the 90-day investment horizon VanEck Gold Miners is expected to generate 0.66 times more return on investment than Pan American. However, VanEck Gold Miners is 1.51 times less risky than Pan American. It trades about 0.26 of its potential returns per unit of risk. Pan American Silver is currently generating about 0.16 per unit of risk. If you would invest  3,426  in VanEck Gold Miners on December 27, 2024 and sell it today you would earn a total of  1,041  from holding VanEck Gold Miners or generate 30.39% return on investment over 90 days.

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

VanEck Gold Miners  vs.  Pan American Silver

VanEck Gold Miners

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Gold Miners are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly sluggish fundamental indicators, VanEck Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pan American Silver

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pan American Silver are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Pan American unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VanEck Gold and Pan American

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

The idea behind VanEck Gold Miners and Pan American Silver 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.