Correlation Between Pilbara Minerals and Silver Spruce

Can any of the company-specific risk be diversified away by investing in both Pilbara Minerals and Silver Spruce 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 Pilbara Minerals and Silver Spruce into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pilbara Minerals Limited and Silver Spruce Resources, you can compare the effects of market volatilities on Pilbara Minerals and Silver Spruce 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 Pilbara Minerals with a short position of Silver Spruce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pilbara Minerals and Silver Spruce.

Diversification Opportunities for Pilbara Minerals and Silver Spruce

0.18

Correlation Coefficient

Pilbara Minerals  Silver Spruce

Average diversification

The 3 months correlation between Pilbara and Silver is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Pilbara Minerals Limited and Silver Spruce Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Spruce Resources and Pilbara Minerals 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 Pilbara Minerals Limited are associated (or correlated) with Silver Spruce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Spruce Resources has no effect on the direction of Pilbara Minerals i.e., Pilbara Minerals and Silver Spruce go up and down completely randomly.

Pair Corralation between Pilbara Minerals and Silver Spruce

Assuming the 90 days horizon Pilbara Minerals Limited is expected to under-perform the Silver Spruce. But the pink sheet apears to be less risky and, when comparing its historical volatility, Pilbara Minerals Limited is 5.44 times less risky than Silver Spruce. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Silver Spruce Resources is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.38  in Silver Spruce Resources on December 29, 2024 and sell it today you would earn a total of  0.06  from holding Silver Spruce Resources or generate 15.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Pilbara Minerals Limited  vs.  Silver Spruce Resources

Pilbara Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pilbara Minerals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Silver Spruce Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Silver Spruce Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Silver Spruce reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pilbara Minerals and Silver Spruce

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

The idea behind Pilbara Minerals Limited and Silver Spruce Resources 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.