Correlation Between New Pacific and SilverCrest Metals

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

Diversification Opportunities for New Pacific and SilverCrest Metals

0.68

Correlation Coefficient

New Pacific  SilverCrest Metals

Poor diversification

The 3 months correlation between New and SilverCrest is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding New Pacific Metals and SilverCrest Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SilverCrest Metals 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 SilverCrest Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SilverCrest Metals has no effect on the direction of New Pacific i.e., New Pacific and SilverCrest Metals go up and down completely randomly.

Pair Corralation between New Pacific and SilverCrest Metals

Assuming the 90 days trading horizon New Pacific Metals is expected to under-perform the SilverCrest Metals. But the stock apears to be less risky and, when comparing its historical volatility, New Pacific Metals is 1.3 times less risky than SilverCrest Metals. The stock trades about -0.42 of its potential returns per unit of risk. The SilverCrest Metals is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,405  in SilverCrest Metals on September 27, 2024 and sell it today you would lose (83.00) from holding SilverCrest Metals or give up 5.91% of portfolio value over 90 days.

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

New Pacific Metals  vs.  SilverCrest Metals

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. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

SilverCrest Metals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SilverCrest Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, SilverCrest Metals is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with New Pacific and SilverCrest Metals

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

The idea behind New Pacific Metals and SilverCrest Metals 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.