Correlation Between Pan American and Hycroft Mining

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

Diversification Opportunities for Pan American and Hycroft Mining

0.39

Correlation Coefficient

Pan American  Hycroft Mining

Weak diversification

The 3 months correlation between Pan and Hycroft is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Pan American Silver and Hycroft Mining Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hycroft Mining Holding 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 Hycroft Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hycroft Mining Holding has no effect on the direction of Pan American i.e., Pan American and Hycroft Mining go up and down completely randomly.

Pair Corralation between Pan American and Hycroft Mining

Given the investment horizon of 90 days Pan American is expected to generate 23.15 times less return on investment than Hycroft Mining. But when comparing it to its historical volatility, Pan American Silver is 5.02 times less risky than Hycroft Mining. It trades about 0.01 of its potential returns per unit of risk. Hycroft Mining Holding is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1.47  in Hycroft Mining Holding on October 8, 2024 and sell it today you would lose (0.42) from holding Hycroft Mining Holding or give up 28.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	92.06%
Values	Daily Returns

Pan American Silver  vs.  Hycroft Mining Holding

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.

Hycroft Mining Holding

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hycroft Mining Holding are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting fundamental indicators, Hycroft Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pan American and Hycroft Mining

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

The idea behind Pan American Silver and Hycroft Mining Holding 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.