Correlation Between Pan American and VanEck Junior

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

Diversification Opportunities for Pan American and VanEck Junior

0.62

Correlation Coefficient

Pan American  VanEck Junior

Poor diversification

The 3 months correlation between Pan and VanEck is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Pan American Silver and VanEck Junior Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Junior 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 VanEck Junior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Junior Gold has no effect on the direction of Pan American i.e., Pan American and VanEck Junior go up and down completely randomly.

Pair Corralation between Pan American and VanEck Junior

Given the investment horizon of 90 days Pan American Silver is expected to under-perform the VanEck Junior. In addition to that, Pan American is 1.29 times more volatile than VanEck Junior Gold. It trades about -0.12 of its total potential returns per unit of risk. VanEck Junior Gold is currently generating about -0.13 per unit of volatility. If you would invest  4,767  in VanEck Junior Gold on September 21, 2024 and sell it today you would lose (328.00) from holding VanEck Junior Gold or give up 6.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Pan American Silver  vs.  VanEck Junior Gold

Pan American Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pan American Silver has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Pan American is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

VanEck Junior Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Junior Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Etf's basic indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the ETF firm stakeholders.

Pair Trading with Pan American and VanEck Junior

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

The idea behind Pan American Silver and VanEck Junior 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.