Correlation Between Silver Spruce and Bitterroot Resources

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

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

Diversification Opportunities for Silver Spruce and Bitterroot Resources

0.16

Correlation Coefficient

Silver Spruce  Bitterroot Resources

Average diversification

The 3 months correlation between Silver and Bitterroot is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Silver Spruce Resources and Bitterroot Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitterroot Resources and Silver Spruce 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 Spruce Resources are associated (or correlated) with Bitterroot Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitterroot Resources has no effect on the direction of Silver Spruce i.e., Silver Spruce and Bitterroot Resources go up and down completely randomly.

Pair Corralation between Silver Spruce and Bitterroot Resources

Assuming the 90 days horizon Silver Spruce Resources is expected to generate 1.18 times more return on investment than Bitterroot Resources. However, Silver Spruce is 1.18 times more volatile than Bitterroot Resources. It trades about 0.12 of its potential returns per unit of risk. Bitterroot Resources is currently generating about 0.03 per unit of risk. If you would invest  0.30  in Silver Spruce Resources on December 22, 2024 and sell it today you would earn a total of  0.15  from holding Silver Spruce Resources or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Silver Spruce Resources  vs.  Bitterroot Resources

Silver Spruce Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Silver Spruce Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Silver Spruce reported solid returns over the last few months and may actually be approaching a breakup point.

Bitterroot Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bitterroot Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bitterroot Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Silver Spruce and Bitterroot Resources

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

The idea behind Silver Spruce Resources and Bitterroot Resources 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.