Correlation Between Silver Spruce and Canstar Resources

Can any of the company-specific risk be diversified away by investing in both Silver Spruce and Canstar 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 Canstar 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 Canstar Resources, you can compare the effects of market volatilities on Silver Spruce and Canstar 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 Canstar Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silver Spruce and Canstar Resources.

Diversification Opportunities for Silver Spruce and Canstar Resources

0.66

Correlation Coefficient

Silver Spruce  Canstar Resources

Poor diversification

The 3 months correlation between Silver and Canstar is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Silver Spruce Resources and Canstar Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canstar 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 Canstar Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canstar Resources has no effect on the direction of Silver Spruce i.e., Silver Spruce and Canstar Resources go up and down completely randomly.

Pair Corralation between Silver Spruce and Canstar Resources

Assuming the 90 days horizon Silver Spruce Resources is expected to generate 0.77 times more return on investment than Canstar Resources. However, Silver Spruce Resources is 1.3 times less risky than Canstar Resources. It trades about 0.17 of its potential returns per unit of risk. Canstar Resources is currently generating about 0.05 per unit of risk. If you would invest  0.30  in Silver Spruce Resources on October 23, 2024 and sell it today you would earn a total of  0.05  from holding Silver Spruce Resources or generate 16.67% return on investment over 90 days.

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

Silver Spruce Resources  vs.  Canstar Resources

Silver Spruce Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Silver Spruce Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Canstar Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Silver Spruce and Canstar Resources

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

The idea behind Silver Spruce Resources and Canstar 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.

Check out your portfolio center.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.