Correlation Between SIL Investments and Selan Exploration

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

By analyzing existing cross correlation between SIL Investments Limited and Selan Exploration Technology, you can compare the effects of market volatilities on SIL Investments and Selan Exploration 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 SIL Investments with a short position of Selan Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIL Investments and Selan Exploration.

Diversification Opportunities for SIL Investments and Selan Exploration

-0.02

Correlation Coefficient

SIL Investments  Selan Exploration

Good diversification

The 3 months correlation between SIL and Selan is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding SIL Investments Limited and Selan Exploration Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selan Exploration and SIL Investments 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 SIL Investments Limited are associated (or correlated) with Selan Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selan Exploration has no effect on the direction of SIL Investments i.e., SIL Investments and Selan Exploration go up and down completely randomly.

Pair Corralation between SIL Investments and Selan Exploration

Assuming the 90 days trading horizon SIL Investments is expected to generate 1.27 times less return on investment than Selan Exploration. But when comparing it to its historical volatility, SIL Investments Limited is 1.12 times less risky than Selan Exploration. It trades about 0.07 of its potential returns per unit of risk. Selan Exploration Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  48,985  in Selan Exploration Technology on September 20, 2024 and sell it today you would earn a total of  38,320  from holding Selan Exploration Technology or generate 78.23% return on investment over 90 days.

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

SIL Investments Limited  vs.  Selan Exploration Technology

SIL Investments

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SIL Investments Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, SIL Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Selan Exploration

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Selan Exploration Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Selan Exploration is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SIL Investments and Selan Exploration

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

The idea behind SIL Investments Limited and Selan Exploration Technology 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.