Correlation Between Rio Silver and Silver Dollar

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

By analyzing existing cross correlation between Rio Silver and Silver Dollar Resources, you can compare the effects of market volatilities on Rio Silver and Silver Dollar 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 Silver Dollar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Silver and Silver Dollar.

Diversification Opportunities for Rio Silver and Silver Dollar

0.05

Correlation Coefficient

Rio Silver  Silver Dollar

Significant diversification

The 3 months correlation between Rio and Silver is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Rio Silver and Silver Dollar Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Dollar Resources 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 Silver Dollar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Dollar Resources has no effect on the direction of Rio Silver i.e., Rio Silver and Silver Dollar go up and down completely randomly.

Pair Corralation between Rio Silver and Silver Dollar

Assuming the 90 days horizon Rio Silver is expected to generate 2.3 times more return on investment than Silver Dollar. However, Rio Silver is 2.3 times more volatile than Silver Dollar Resources. It trades about 0.01 of its potential returns per unit of risk. Silver Dollar Resources is currently generating about -0.01 per unit of risk. If you would invest  2.50  in Rio Silver on December 20, 2024 and sell it today you would lose (1.50) from holding Rio Silver or give up 60.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Rio Silver  vs.  Silver Dollar Resources

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.

Silver Dollar Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Silver Dollar Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Silver Dollar is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Rio Silver and Silver Dollar

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

The idea behind Rio Silver and Silver Dollar 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.