Correlation Between Guanajuato Silver and Defiance Silver

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

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

Diversification Opportunities for Guanajuato Silver and Defiance Silver

0.88

Correlation Coefficient

Guanajuato Silver  Defiance Silver

Very poor diversification

The 3 months correlation between Guanajuato and Defiance is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Guanajuato Silver and Defiance Silver Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance Silver Corp and Guanajuato 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 Guanajuato Silver are associated (or correlated) with Defiance Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance Silver Corp has no effect on the direction of Guanajuato Silver i.e., Guanajuato Silver and Defiance Silver go up and down completely randomly.

Pair Corralation between Guanajuato Silver and Defiance Silver

Assuming the 90 days trading horizon Guanajuato Silver is expected to generate 1.71 times less return on investment than Defiance Silver. But when comparing it to its historical volatility, Guanajuato Silver is 1.15 times less risky than Defiance Silver. It trades about 0.01 of its potential returns per unit of risk. Defiance Silver Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  24.00  in Defiance Silver Corp on September 5, 2024 and sell it today you would lose (1.00) from holding Defiance Silver Corp or give up 4.17% of portfolio value over 90 days.

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

Guanajuato Silver  vs.  Defiance Silver Corp

Guanajuato Silver

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guanajuato Silver are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Guanajuato Silver is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Defiance Silver Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Defiance Silver Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Defiance Silver may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Guanajuato Silver and Defiance Silver

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

The idea behind Guanajuato Silver and Defiance 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..