Correlation Between Pan American and FireFox Gold

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

Diversification Opportunities for Pan American and FireFox Gold

-0.21

Correlation Coefficient

Pan American  FireFox Gold

Very good diversification

The 3 months correlation between Pan and FireFox is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Pan American Silver and FireFox Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FireFox Gold Corp 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 FireFox Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FireFox Gold Corp has no effect on the direction of Pan American i.e., Pan American and FireFox Gold go up and down completely randomly.

Pair Corralation between Pan American and FireFox Gold

Given the investment horizon of 90 days Pan American Silver is expected to generate 0.26 times more return on investment than FireFox Gold. However, Pan American Silver is 3.82 times less risky than FireFox Gold. It trades about 0.19 of its potential returns per unit of risk. FireFox Gold Corp is currently generating about 0.03 per unit of risk. If you would invest  2,038  in Pan American Silver on December 19, 2024 and sell it today you would earn a total of  622.00  from holding Pan American Silver or generate 30.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Pan American Silver  vs.  FireFox Gold Corp

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.

FireFox Gold Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FireFox Gold Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FireFox Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pan American and FireFox Gold

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

The idea behind Pan American Silver and FireFox Gold 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.