Correlation Between GoGold Resources and MAG Silver

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

By analyzing existing cross correlation between GoGold Resources and MAG Silver Corp, you can compare the effects of market volatilities on GoGold Resources and MAG Silver 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 GoGold Resources with a short position of MAG Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of GoGold Resources and MAG Silver.

Diversification Opportunities for GoGold Resources and MAG Silver

0.8

Correlation Coefficient

GoGold Resources  MAG Silver

Very poor diversification

The 3 months correlation between GoGold and MAG is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding GoGold Resources and MAG Silver Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAG Silver Corp and GoGold Resources 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 GoGold Resources are associated (or correlated) with MAG Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAG Silver Corp has no effect on the direction of GoGold Resources i.e., GoGold Resources and MAG Silver go up and down completely randomly.

Pair Corralation between GoGold Resources and MAG Silver

Assuming the 90 days trading horizon GoGold Resources is expected to under-perform the MAG Silver. In addition to that, GoGold Resources is 1.34 times more volatile than MAG Silver Corp. It trades about -0.07 of its total potential returns per unit of risk. MAG Silver Corp is currently generating about 0.01 per unit of volatility. If you would invest  2,045  in MAG Silver Corp on October 7, 2024 and sell it today you would lose (17.00) from holding MAG Silver Corp or give up 0.83% of portfolio value over 90 days.

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

GoGold Resources  vs.  MAG Silver Corp

GoGold Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GoGold Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental 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.

MAG Silver Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MAG Silver Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, MAG Silver is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with GoGold Resources and MAG Silver

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

The idea behind GoGold Resources and MAG Silver Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.