Correlation Between Shopify and Searchlight Minerals

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

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

Diversification Opportunities for Shopify and Searchlight Minerals

-0.07

Correlation Coefficient

Shopify  Searchlight Minerals

Good diversification

The 3 months correlation between Shopify and Searchlight is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Shopify and Searchlight Minerals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Searchlight Minerals Corp and Shopify 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 Shopify are associated (or correlated) with Searchlight Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Searchlight Minerals Corp has no effect on the direction of Shopify i.e., Shopify and Searchlight Minerals go up and down completely randomly.

Pair Corralation between Shopify and Searchlight Minerals

Given the investment horizon of 90 days Shopify is expected to under-perform the Searchlight Minerals. But the stock apears to be less risky and, when comparing its historical volatility, Shopify is 2.79 times less risky than Searchlight Minerals. The stock trades about -0.02 of its potential returns per unit of risk. The Searchlight Minerals Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  0.31  in Searchlight Minerals Corp on December 21, 2024 and sell it today you would earn a total of  0.29  from holding Searchlight Minerals Corp or generate 93.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Shopify  vs.  Searchlight Minerals Corp

Shopify

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shopify has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Shopify is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Searchlight Minerals Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Searchlight Minerals Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile fundamental indicators, Searchlight Minerals demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shopify and Searchlight Minerals

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

The idea behind Shopify and Searchlight Minerals 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.