Correlation Between Silver One and South32

Can any of the company-specific risk be diversified away by investing in both Silver One and South32 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 One and South32 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Silver One Resources and South32 Limited, you can compare the effects of market volatilities on Silver One and South32 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 One with a short position of South32. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silver One and South32.

Diversification Opportunities for Silver One and South32

0.39

Correlation Coefficient

Silver One  South32

Weak diversification

The 3 months correlation between Silver and South32 is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Silver One Resources and South32 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South32 Limited and Silver One 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 One Resources are associated (or correlated) with South32. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South32 Limited has no effect on the direction of Silver One i.e., Silver One and South32 go up and down completely randomly.

Pair Corralation between Silver One and South32

Assuming the 90 days horizon Silver One Resources is expected to generate 3.1 times more return on investment than South32. However, Silver One is 3.1 times more volatile than South32 Limited. It trades about 0.1 of its potential returns per unit of risk. South32 Limited is currently generating about -0.04 per unit of risk. If you would invest  13.00  in Silver One Resources on December 30, 2024 and sell it today you would earn a total of  5.00  from holding Silver One Resources or generate 38.46% return on investment over 90 days.

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

Silver One Resources  vs.  South32 Limited

Silver One Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Silver One Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Silver One reported solid returns over the last few months and may actually be approaching a breakup point.

South32 Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days South32 Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, South32 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Silver One and South32

The main advantage of trading using opposite Silver One and South32 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silver One position performs unexpectedly, South32 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 South32 will offset losses from the drop in South32's long position.

The idea behind Silver One Resources and South32 Limited 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .