Correlation Between Pan American and Centerra Gold

Can any of the company-specific risk be diversified away by investing in both Pan American and Centerra Gold 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 Pan American and Centerra Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pan American Silver and Centerra Gold, you can compare the effects of market volatilities on Pan American and Centerra Gold 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 Pan American with a short position of Centerra Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan American and Centerra Gold.

Diversification Opportunities for Pan American and Centerra Gold

0.54

Correlation Coefficient

Pan American  Centerra Gold

Very weak diversification

The 3 months correlation between Pan and Centerra is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Pan American Silver and Centerra Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centerra Gold and Pan American 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 Pan American Silver are associated (or correlated) with Centerra Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centerra Gold has no effect on the direction of Pan American i.e., Pan American and Centerra Gold go up and down completely randomly.

Pair Corralation between Pan American and Centerra Gold

Assuming the 90 days trading horizon Pan American Silver is expected to generate 1.11 times more return on investment than Centerra Gold. However, Pan American is 1.11 times more volatile than Centerra Gold. It trades about 0.15 of its potential returns per unit of risk. Centerra Gold is currently generating about 0.07 per unit of risk. If you would invest  2,979  in Pan American Silver on December 23, 2024 and sell it today you would earn a total of  712.00  from holding Pan American Silver or generate 23.9% return on investment over 90 days.

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

Pan American Silver  vs.  Centerra Gold

Pan American Silver

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pan American Silver are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Pan American displayed solid returns over the last few months and may actually be approaching a breakup point.

Centerra Gold

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Centerra Gold are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Centerra Gold may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Pan American and Centerra Gold

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

The idea behind Pan American Silver and Centerra Gold 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..