Correlation Between Guanajuato Silver and Equity Metals

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

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

Diversification Opportunities for Guanajuato Silver and Equity Metals

0.6

Correlation Coefficient

Guanajuato Silver  Equity Metals

Poor diversification

The 3 months correlation between Guanajuato and Equity is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Guanajuato Silver and Equity Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Metals 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 Equity Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Metals Corp has no effect on the direction of Guanajuato Silver i.e., Guanajuato Silver and Equity Metals go up and down completely randomly.

Pair Corralation between Guanajuato Silver and Equity Metals

Assuming the 90 days trading horizon Guanajuato Silver is expected to generate 0.74 times more return on investment than Equity Metals. However, Guanajuato Silver is 1.35 times less risky than Equity Metals. It trades about -0.03 of its potential returns per unit of risk. Equity Metals Corp is currently generating about -0.13 per unit of risk. If you would invest  19.00  in Guanajuato Silver on December 3, 2024 and sell it today you would lose (1.00) from holding Guanajuato Silver or give up 5.26% of portfolio value over 90 days.

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

Guanajuato Silver  vs.  Equity Metals Corp

Guanajuato Silver

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guanajuato Silver has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Guanajuato Silver is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Equity Metals Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equity Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Equity Metals is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Guanajuato Silver and Equity Metals

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

The idea behind Guanajuato Silver and Equity Metals 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.