Correlation Between Red Hill and Andean Silver

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

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

Diversification Opportunities for Red Hill and Andean Silver

-0.61

Correlation Coefficient

Red Hill  Andean Silver

Excellent diversification

The 3 months correlation between Red and Andean is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Red Hill Iron and Andean Silver Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Andean Silver Limited and Red Hill 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 Red Hill Iron are associated (or correlated) with Andean Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Andean Silver Limited has no effect on the direction of Red Hill i.e., Red Hill and Andean Silver go up and down completely randomly.

Pair Corralation between Red Hill and Andean Silver

Assuming the 90 days trading horizon Red Hill is expected to generate 5.15 times less return on investment than Andean Silver. But when comparing it to its historical volatility, Red Hill Iron is 2.08 times less risky than Andean Silver. It trades about 0.03 of its potential returns per unit of risk. Andean Silver Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  29.00  in Andean Silver Limited on October 4, 2024 and sell it today you would earn a total of  52.00  from holding Andean Silver Limited or generate 179.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	86.97%
Values	Daily Returns

Red Hill Iron  vs.  Andean Silver Limited

Red Hill Iron

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Red Hill Iron are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Red Hill unveiled solid returns over the last few months and may actually be approaching a breakup point.

Andean Silver Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Andean Silver Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Red Hill and Andean Silver

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

The idea behind Red Hill Iron and Andean Silver Limited 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.