Correlation Between Silver Futures and Micro Silver

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

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

Diversification Opportunities for Silver Futures and Micro Silver

1.0

Correlation Coefficient

Silver Futures  Micro Silver

No risk reduction

The 3 months correlation between Silver and Micro is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Silver Futures and Micro Silver Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro Silver Futures and Silver Futures 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 Silver Futures are associated (or correlated) with Micro Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Silver Futures has no effect on the direction of Silver Futures i.e., Silver Futures and Micro Silver go up and down completely randomly.

Pair Corralation between Silver Futures and Micro Silver

Assuming the 90 days horizon Silver Futures is expected to generate about the same return on investment as Micro Silver Futures. However, Silver Futures is 1.0 times more volatile than Micro Silver Futures. It trades about 0.03 of its potential returns per unit of risk. Micro Silver Futures is currently producing about 0.03 per unit of risk. If you would invest  2,407  in Micro Silver Futures on October 7, 2024 and sell it today you would earn a total of  603.00  from holding Micro Silver Futures or generate 25.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Silver Futures  vs.  Micro Silver Futures

Silver Futures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Silver Futures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Silver Futures is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Micro Silver Futures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Micro Silver Futures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Micro Silver is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Silver Futures and Micro Silver

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

The idea behind Silver Futures and Micro Silver Futures 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.