Correlation Between Thunder Mountain and Defiance Silver

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

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

Diversification Opportunities for Thunder Mountain and Defiance Silver

-0.6

Correlation Coefficient

Thunder Mountain  Defiance Silver

Excellent diversification

The 3 months correlation between Thunder and Defiance is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Thunder Mountain Gold and Defiance Silver Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance Silver Corp and Thunder Mountain 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 Thunder Mountain Gold are associated (or correlated) with Defiance Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance Silver Corp has no effect on the direction of Thunder Mountain i.e., Thunder Mountain and Defiance Silver go up and down completely randomly.

Pair Corralation between Thunder Mountain and Defiance Silver

Given the investment horizon of 90 days Thunder Mountain Gold is expected to generate 1.43 times more return on investment than Defiance Silver. However, Thunder Mountain is 1.43 times more volatile than Defiance Silver Corp. It trades about 0.05 of its potential returns per unit of risk. Defiance Silver Corp is currently generating about 0.04 per unit of risk. If you would invest  12.00  in Thunder Mountain Gold on October 23, 2024 and sell it today you would lose (2.00) from holding Thunder Mountain Gold or give up 16.67% of portfolio value over 90 days.

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

Thunder Mountain Gold  vs.  Defiance Silver Corp

Thunder Mountain Gold

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thunder Mountain Gold are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating primary indicators, Thunder Mountain reported solid returns over the last few months and may actually be approaching a breakup point.

Defiance Silver Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Defiance Silver Corp 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 basic indicators 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.

Pair Trading with Thunder Mountain and Defiance Silver

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

The idea behind Thunder Mountain Gold and Defiance Silver Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.