Correlation Between Spanish Mountain and Bear Creek

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Can any of the company-specific risk be diversified away by investing in both Spanish Mountain and Bear Creek 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 Spanish Mountain and Bear Creek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spanish Mountain Gold and Bear Creek Mining, you can compare the effects of market volatilities on Spanish Mountain and Bear Creek 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 Spanish Mountain with a short position of Bear Creek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spanish Mountain and Bear Creek.

Diversification Opportunities for Spanish Mountain and Bear Creek

SpanishBearDiversified AwaySpanishBearDiversified Away100%
-0.1
  Correlation Coefficient

Good diversification

The 3 months correlation between Spanish and Bear is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Spanish Mountain Gold and Bear Creek Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bear Creek Mining and Spanish Mountain 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 Spanish Mountain Gold are associated (or correlated) with Bear Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bear Creek Mining has no effect on the direction of Spanish Mountain i.e., Spanish Mountain and Bear Creek go up and down completely randomly.

Pair Corralation between Spanish Mountain and Bear Creek

Assuming the 90 days horizon Spanish Mountain Gold is expected to under-perform the Bear Creek. But the stock apears to be less risky and, when comparing its historical volatility, Spanish Mountain Gold is 1.25 times less risky than Bear Creek. The stock trades about -0.12 of its potential returns per unit of risk. The Bear Creek Mining is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  41.00  in Bear Creek Mining on September 13, 2024 and sell it today you would earn a total of  5.00  from holding Bear Creek Mining or generate 12.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Spanish Mountain Gold  vs.  Bear Creek Mining

 Performance 
JavaScript chart by amCharts 3.21.15OctNov 050100
JavaScript chart by amCharts 3.21.15SPA BCM
       Timeline  
Spanish Mountain Gold 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Spanish Mountain Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec0.10.110.120.130.140.150.160.170.18
Bear Creek Mining 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Bear Creek Mining are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Bear Creek showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec0.350.40.450.50.550.60.650.7

Spanish Mountain and Bear Creek Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-7.66-5.74-3.81-1.89-0.02831.673.375.076.77 0.0080.0100.0120.0140.0160.0180.020
JavaScript chart by amCharts 3.21.15SPA BCM
       Returns  

Pair Trading with Spanish Mountain and Bear Creek

The main advantage of trading using opposite Spanish Mountain and Bear Creek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spanish Mountain position performs unexpectedly, Bear Creek 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 Bear Creek will offset losses from the drop in Bear Creek's long position.
The idea behind Spanish Mountain Gold and Bear Creek Mining 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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