Correlation Between Summa Silver and Clean Air

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

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

Diversification Opportunities for Summa Silver and Clean Air

-0.39

Correlation Coefficient

Summa Silver  Clean Air

Very good diversification

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

Pair Corralation between Summa Silver and Clean Air

Assuming the 90 days trading horizon Summa Silver Corp is expected to generate 0.7 times more return on investment than Clean Air. However, Summa Silver Corp is 1.43 times less risky than Clean Air. It trades about 0.12 of its potential returns per unit of risk. Clean Air Metals is currently generating about 0.03 per unit of risk. If you would invest  28.00  in Summa Silver Corp on December 21, 2024 and sell it today you would earn a total of  9.00  from holding Summa Silver Corp or generate 32.14% return on investment over 90 days.

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

Summa Silver Corp  vs.  Clean Air Metals

Summa Silver Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Summa Silver Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Summa Silver showed solid returns over the last few months and may actually be approaching a breakup point.

Clean Air Metals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Clean Air Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Clean Air showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summa Silver and Clean Air

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

The idea behind Summa Silver Corp and Clean Air Metals 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.