Correlation Between MAG Silver and Equity Metals

Can any of the company-specific risk be diversified away by investing in both MAG 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 MAG 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 MAG Silver Corp and Equity Metals Corp, you can compare the effects of market volatilities on MAG 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 MAG Silver with a short position of Equity Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAG Silver and Equity Metals.

Diversification Opportunities for MAG Silver and Equity Metals

0.82

Correlation Coefficient

MAG Silver  Equity Metals

Very poor diversification

The 3 months correlation between MAG and Equity is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding MAG Silver Corp 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 MAG 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 MAG Silver Corp 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 MAG Silver i.e., MAG Silver and Equity Metals go up and down completely randomly.

Pair Corralation between MAG Silver and Equity Metals

Assuming the 90 days trading horizon MAG Silver is expected to generate 1.78 times less return on investment than Equity Metals. But when comparing it to its historical volatility, MAG Silver Corp is 1.35 times less risky than Equity Metals. It trades about 0.18 of its potential returns per unit of risk. Equity Metals Corp is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Equity Metals Corp on October 23, 2024 and sell it today you would earn a total of  3.00  from holding Equity Metals Corp or generate 16.67% return on investment over 90 days.

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

MAG Silver Corp  vs.  Equity Metals Corp

MAG Silver Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MAG Silver Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Equity Metals Corp

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with MAG Silver and Equity Metals

The main advantage of trading using opposite MAG Silver and Equity Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAG 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 MAG Silver Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.