Correlation Between SilverCrest Metals and China Gold

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

By analyzing existing cross correlation between SilverCrest Metals and China Gold International, you can compare the effects of market volatilities on SilverCrest Metals and China Gold 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 SilverCrest Metals with a short position of China Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of SilverCrest Metals and China Gold.

Diversification Opportunities for SilverCrest Metals and China Gold

0.27

Correlation Coefficient

SilverCrest Metals  China Gold

Modest diversification

The 3 months correlation between SilverCrest and China is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding SilverCrest Metals and China Gold International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Gold International and SilverCrest Metals 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 SilverCrest Metals are associated (or correlated) with China Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Gold International has no effect on the direction of SilverCrest Metals i.e., SilverCrest Metals and China Gold go up and down completely randomly.

Pair Corralation between SilverCrest Metals and China Gold

Given the investment horizon of 90 days SilverCrest Metals is expected to generate 1.1 times more return on investment than China Gold. However, SilverCrest Metals is 1.1 times more volatile than China Gold International. It trades about 0.27 of its potential returns per unit of risk. China Gold International is currently generating about 0.2 per unit of risk. If you would invest  892.00  in SilverCrest Metals on December 30, 2024 and sell it today you would earn a total of  263.00  from holding SilverCrest Metals or generate 29.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	51.61%
Values	Daily Returns

SilverCrest Metals  vs.  China Gold International

SilverCrest Metals

Risk-Adjusted Performance

Solid

Over the last 90 days SilverCrest Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly conflicting essential indicators, SilverCrest Metals showed solid returns over the last few months and may actually be approaching a breakup point.

China Gold International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Gold International are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, China Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SilverCrest Metals and China Gold

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

The idea behind SilverCrest Metals and China Gold International 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.