Correlation Between New Pacific and AbraSilver Resource

Can any of the company-specific risk be diversified away by investing in both New Pacific and AbraSilver 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 New Pacific and AbraSilver Resource into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for New Pacific and AbraSilver Resource

0.89

Correlation Coefficient

New Pacific  AbraSilver Resource

Very poor diversification

The 3 months correlation between New and AbraSilver is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding New Pacific Metals and AbraSilver Resource Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AbraSilver Resource Corp and New Pacific 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 New Pacific Metals are associated (or correlated) with AbraSilver Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AbraSilver Resource Corp has no effect on the direction of New Pacific i.e., New Pacific and AbraSilver Resource go up and down completely randomly.

Pair Corralation between New Pacific and AbraSilver Resource

Given the investment horizon of 90 days New Pacific Metals is expected to under-perform the AbraSilver Resource. But the stock apears to be less risky and, when comparing its historical volatility, New Pacific Metals is 1.28 times less risky than AbraSilver Resource. The stock trades about -0.27 of its potential returns per unit of risk. The AbraSilver Resource Corp is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  180.00  in AbraSilver Resource Corp on October 8, 2024 and sell it today you would lose (8.00) from holding AbraSilver Resource Corp or give up 4.44% of portfolio value over 90 days.

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

New Pacific Metals  vs.  AbraSilver Resource Corp

New Pacific Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Pacific Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

AbraSilver Resource Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AbraSilver Resource Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with New Pacific and AbraSilver Resource

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

The idea behind New Pacific Metals and AbraSilver Resource 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.