Correlation Between Silver Mines and Dolly Varden

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

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

Diversification Opportunities for Silver Mines and Dolly Varden

0.78

Correlation Coefficient

Silver Mines  Dolly Varden

Poor diversification

The 3 months correlation between Silver and Dolly is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Silver Mines Limited and Dolly Varden Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dolly Varden Silver and Silver Mines 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 Mines Limited are associated (or correlated) with Dolly Varden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dolly Varden Silver has no effect on the direction of Silver Mines i.e., Silver Mines and Dolly Varden go up and down completely randomly.

Pair Corralation between Silver Mines and Dolly Varden

Assuming the 90 days horizon Silver Mines Limited is expected to generate 0.69 times more return on investment than Dolly Varden. However, Silver Mines Limited is 1.46 times less risky than Dolly Varden. It trades about -0.08 of its potential returns per unit of risk. Dolly Varden Silver is currently generating about -0.13 per unit of risk. If you would invest  4.88  in Silver Mines Limited on October 11, 2024 and sell it today you would lose (0.46) from holding Silver Mines Limited or give up 9.43% of portfolio value over 90 days.

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

Silver Mines Limited  vs.  Dolly Varden Silver

Silver Mines Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dolly Varden Silver

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Silver Mines and Dolly Varden

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

The idea behind Silver Mines Limited and Dolly Varden Silver 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.