Correlation Between Guanajuato Silver and Andean Precious

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

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

Diversification Opportunities for Guanajuato Silver and Andean Precious

0.25

Correlation Coefficient

Guanajuato Silver  Andean Precious

Modest diversification

The 3 months correlation between Guanajuato and Andean is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Guanajuato Silver and Andean Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Andean Precious Metals 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 Andean Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Andean Precious Metals has no effect on the direction of Guanajuato Silver i.e., Guanajuato Silver and Andean Precious go up and down completely randomly.

Pair Corralation between Guanajuato Silver and Andean Precious

Assuming the 90 days horizon Guanajuato Silver is expected to generate 3.69 times less return on investment than Andean Precious. In addition to that, Guanajuato Silver is 1.32 times more volatile than Andean Precious Metals. It trades about 0.03 of its total potential returns per unit of risk. Andean Precious Metals is currently generating about 0.12 per unit of volatility. If you would invest  89.00  in Andean Precious Metals on December 22, 2024 and sell it today you would earn a total of  25.00  from holding Andean Precious Metals or generate 28.09% return on investment over 90 days.

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

Guanajuato Silver  vs.  Andean Precious Metals

Guanajuato Silver

Risk-Adjusted Performance

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. Despite nearly weak basic indicators, Guanajuato Silver may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Andean Precious Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Andean Precious Metals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Andean Precious reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guanajuato Silver and Andean Precious

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

The idea behind Guanajuato Silver and Andean Precious 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.