Correlation Between Southern Silver and GoGold Resources

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

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

Diversification Opportunities for Southern Silver and GoGold Resources

0.49

Correlation Coefficient

Southern Silver  GoGold Resources

Very weak diversification

The 3 months correlation between Southern and GoGold is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Southern Silver Exploration and GoGold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoGold Resources and Southern Silver 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 Southern Silver Exploration are associated (or correlated) with GoGold Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoGold Resources has no effect on the direction of Southern Silver i.e., Southern Silver and GoGold Resources go up and down completely randomly.

Pair Corralation between Southern Silver and GoGold Resources

Assuming the 90 days horizon Southern Silver Exploration is expected to under-perform the GoGold Resources. In addition to that, Southern Silver is 1.46 times more volatile than GoGold Resources. It trades about -0.06 of its total potential returns per unit of risk. GoGold Resources is currently generating about 0.02 per unit of volatility. If you would invest  86.00  in GoGold Resources on September 12, 2024 and sell it today you would lose (1.00) from holding GoGold Resources or give up 1.16% of portfolio value over 90 days.

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

Southern Silver Exploration  vs.  GoGold Resources

Southern Silver Expl

Risk-Adjusted Performance

0 of 100

Very Weak

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

GoGold Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GoGold Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, GoGold Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Southern Silver and GoGold Resources

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

The idea behind Southern Silver Exploration and GoGold 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.