Correlation Between GoldMining and SilverCrest Metals

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

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

Diversification Opportunities for GoldMining and SilverCrest Metals

0.27

Correlation Coefficient

GoldMining  SilverCrest Metals

Modest diversification

The 3 months correlation between GoldMining and SilverCrest is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding GoldMining and SilverCrest Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SilverCrest Metals and GoldMining 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 GoldMining are associated (or correlated) with SilverCrest Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SilverCrest Metals has no effect on the direction of GoldMining i.e., GoldMining and SilverCrest Metals go up and down completely randomly.

Pair Corralation between GoldMining and SilverCrest Metals

Assuming the 90 days trading horizon GoldMining is expected to under-perform the SilverCrest Metals. But the stock apears to be less risky and, when comparing its historical volatility, GoldMining is 1.55 times less risky than SilverCrest Metals. The stock trades about 0.0 of its potential returns per unit of risk. The SilverCrest Metals is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,041  in SilverCrest Metals on September 4, 2024 and sell it today you would earn a total of  336.00  from holding SilverCrest Metals or generate 32.28% return on investment over 90 days.

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

GoldMining  vs.  SilverCrest Metals

GoldMining

Risk-Adjusted Performance

0 of 100

Very Weak

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

SilverCrest Metals

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SilverCrest Metals are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, SilverCrest Metals displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GoldMining and SilverCrest Metals

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

The idea behind GoldMining and SilverCrest Metals 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.