Correlation Between IMPACT Silver and Discovery Metals

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

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

Diversification Opportunities for IMPACT Silver and Discovery Metals

0.75

Correlation Coefficient

IMPACT Silver  Discovery Metals

Poor diversification

The 3 months correlation between IMPACT and Discovery is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding IMPACT Silver Corp and Discovery Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discovery Metals Corp and IMPACT 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 IMPACT Silver Corp are associated (or correlated) with Discovery Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discovery Metals Corp has no effect on the direction of IMPACT Silver i.e., IMPACT Silver and Discovery Metals go up and down completely randomly.

Pair Corralation between IMPACT Silver and Discovery Metals

Assuming the 90 days horizon IMPACT Silver Corp is expected to generate 1.16 times more return on investment than Discovery Metals. However, IMPACT Silver is 1.16 times more volatile than Discovery Metals Corp. It trades about 0.01 of its potential returns per unit of risk. Discovery Metals Corp is currently generating about 0.0 per unit of risk. If you would invest  21.00  in IMPACT Silver Corp on October 5, 2024 and sell it today you would lose (7.00) from holding IMPACT Silver Corp or give up 33.33% of portfolio value over 90 days.

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

IMPACT Silver Corp  vs.  Discovery Metals Corp

IMPACT Silver Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IMPACT Silver Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Discovery Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Discovery Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with IMPACT Silver and Discovery Metals

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

The idea behind IMPACT Silver Corp and Discovery 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.