Correlation Between Royal Gold and Fortuna Silver

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

By analyzing existing cross correlation between Royal Gold and Fortuna Silver Mines, you can compare the effects of market volatilities on Royal Gold and Fortuna Silver 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 Royal Gold with a short position of Fortuna Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Gold and Fortuna Silver.

Diversification Opportunities for Royal Gold and Fortuna Silver

0.8

Correlation Coefficient

Royal Gold  Fortuna Silver

Very poor diversification

The 3 months correlation between Royal and Fortuna is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Royal Gold and Fortuna Silver Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortuna Silver Mines and Royal Gold 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 Royal Gold are associated (or correlated) with Fortuna Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortuna Silver Mines has no effect on the direction of Royal Gold i.e., Royal Gold and Fortuna Silver go up and down completely randomly.

Pair Corralation between Royal Gold and Fortuna Silver

Given the investment horizon of 90 days Royal Gold is expected to generate 1.62 times less return on investment than Fortuna Silver. But when comparing it to its historical volatility, Royal Gold is 1.93 times less risky than Fortuna Silver. It trades about 0.03 of its potential returns per unit of risk. Fortuna Silver Mines is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  394.00  in Fortuna Silver Mines on September 23, 2024 and sell it today you would earn a total of  38.00  from holding Fortuna Silver Mines or generate 9.64% return on investment over 90 days.

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

Royal Gold  vs.  Fortuna Silver Mines

Royal Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royal Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Royal Gold is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Fortuna Silver Mines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortuna Silver Mines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Fortuna Silver is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Royal Gold and Fortuna Silver

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

The idea behind Royal Gold and Fortuna Silver Mines 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.