Correlation Between Talisman Mining and Andean Silver

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

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

Diversification Opportunities for Talisman Mining and Andean Silver

0.68

Correlation Coefficient

Talisman Mining  Andean Silver

Poor diversification

The 3 months correlation between Talisman and Andean is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Talisman Mining and Andean Silver Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Andean Silver Limited and Talisman Mining 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 Talisman Mining are associated (or correlated) with Andean Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Andean Silver Limited has no effect on the direction of Talisman Mining i.e., Talisman Mining and Andean Silver go up and down completely randomly.

Pair Corralation between Talisman Mining and Andean Silver

Assuming the 90 days trading horizon Talisman Mining is expected to generate 1.84 times less return on investment than Andean Silver. But when comparing it to its historical volatility, Talisman Mining is 1.01 times less risky than Andean Silver. It trades about 0.04 of its potential returns per unit of risk. Andean Silver Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  27.00  in Andean Silver Limited on September 24, 2024 and sell it today you would earn a total of  56.00  from holding Andean Silver Limited or generate 207.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	83.47%
Values	Daily Returns

Talisman Mining  vs.  Andean Silver Limited

Talisman Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Talisman Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Talisman Mining is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Andean Silver Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Andean Silver Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Talisman Mining and Andean Silver

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

The idea behind Talisman Mining and Andean Silver Limited 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.