Correlation Between MAG Silver and Gold Resource

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

Diversification Opportunities for MAG Silver and Gold Resource

0.39

Correlation Coefficient

MAG Silver  Gold Resource

Weak diversification

The 3 months correlation between MAG and Gold is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding MAG Silver Corp and Gold Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Resource 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 Gold Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Resource has no effect on the direction of MAG Silver i.e., MAG Silver and Gold Resource go up and down completely randomly.

Pair Corralation between MAG Silver and Gold Resource

Considering the 90-day investment horizon MAG Silver is expected to generate 6.99 times less return on investment than Gold Resource. But when comparing it to its historical volatility, MAG Silver Corp is 2.79 times less risky than Gold Resource. It trades about 0.08 of its potential returns per unit of risk. Gold Resource is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  22.00  in Gold Resource on December 26, 2024 and sell it today you would earn a total of  33.00  from holding Gold Resource or generate 150.0% 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.  Gold Resource

MAG Silver Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MAG Silver Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, MAG Silver reported solid returns over the last few months and may actually be approaching a breakup point.

Gold Resource

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Resource are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Gold Resource displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MAG Silver and Gold Resource

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

The idea behind MAG Silver Corp and Gold Resource 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.