Correlation Between Rio Silver and Prime Mining

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

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

Diversification Opportunities for Rio Silver and Prime Mining

-0.17

Correlation Coefficient

Rio Silver  Prime Mining

Good diversification

The 3 months correlation between Rio and Prime is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Rio Silver and Prime Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Mining Corp and Rio Silver 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 Rio Silver are associated (or correlated) with Prime Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Mining Corp has no effect on the direction of Rio Silver i.e., Rio Silver and Prime Mining go up and down completely randomly.

Pair Corralation between Rio Silver and Prime Mining

Assuming the 90 days horizon Rio Silver is expected to generate 2.14 times less return on investment than Prime Mining. In addition to that, Rio Silver is 3.42 times more volatile than Prime Mining Corp. It trades about 0.01 of its total potential returns per unit of risk. Prime Mining Corp is currently generating about 0.05 per unit of volatility. If you would invest  104.00  in Prime Mining Corp on December 20, 2024 and sell it today you would earn a total of  9.00  from holding Prime Mining Corp or generate 8.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Rio Silver  vs.  Prime Mining Corp

Rio Silver

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rio Silver has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unfluctuating basic indicators, Rio Silver may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Prime Mining Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Mining Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Prime Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rio Silver and Prime Mining

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

The idea behind Rio Silver and Prime Mining Corp 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.