Correlation Between Pan American and Aris Mining

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

Diversification Opportunities for Pan American and Aris Mining

0.85

Correlation Coefficient

Pan American  Aris Mining

Very poor diversification

The 3 months correlation between Pan and Aris is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Pan American Silver and Aris Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aris Mining 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 Aris Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aris Mining has no effect on the direction of Pan American i.e., Pan American and Aris Mining go up and down completely randomly.

Pair Corralation between Pan American and Aris Mining

Given the investment horizon of 90 days Pan American is expected to generate 1.03 times less return on investment than Aris Mining. But when comparing it to its historical volatility, Pan American Silver is 1.11 times less risky than Aris Mining. It trades about 0.18 of its potential returns per unit of risk. Aris Mining is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  346.00  in Aris Mining on December 20, 2024 and sell it today you would earn a total of  104.00  from holding Aris Mining or generate 30.06% return on investment over 90 days.

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

Pan American Silver  vs.  Aris Mining

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 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Pan American unveiled solid returns over the last few months and may actually be approaching a breakup point.

Aris Mining

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aris Mining are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Aris Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pan American and Aris Mining

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

The idea behind Pan American Silver and Aris Mining 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.