Correlation Between MAG Silver and Solution Financial

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

Diversification Opportunities for MAG Silver and Solution Financial

0.21

Correlation Coefficient

MAG Silver  Solution Financial

Modest diversification

The 3 months correlation between MAG and Solution is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding MAG Silver Corp and Solution Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Financial 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 Solution Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Financial has no effect on the direction of MAG Silver i.e., MAG Silver and Solution Financial go up and down completely randomly.

Pair Corralation between MAG Silver and Solution Financial

Assuming the 90 days trading horizon MAG Silver Corp is expected to generate 1.05 times more return on investment than Solution Financial. However, MAG Silver is 1.05 times more volatile than Solution Financial. It trades about 0.15 of its potential returns per unit of risk. Solution Financial is currently generating about 0.01 per unit of risk. If you would invest  2,007  in MAG Silver Corp on October 25, 2024 and sell it today you would earn a total of  151.00  from holding MAG Silver Corp or generate 7.52% return on investment over 90 days.

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

MAG Silver Corp  vs.  Solution Financial

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.

Solution Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solution Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Solution Financial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with MAG Silver and Solution Financial

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

The idea behind MAG Silver Corp and Solution Financial 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.

Check out your portfolio center.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.