Correlation Between Americas Silver and Foraco International

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

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

Diversification Opportunities for Americas Silver and Foraco International

0.71

Correlation Coefficient

Americas Silver  Foraco International

Poor diversification

The 3 months correlation between Americas and Foraco is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Americas Silver Corp and Foraco International SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foraco International and Americas 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 Americas Silver Corp are associated (or correlated) with Foraco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foraco International has no effect on the direction of Americas Silver i.e., Americas Silver and Foraco International go up and down completely randomly.

Pair Corralation between Americas Silver and Foraco International

Assuming the 90 days trading horizon Americas Silver Corp is expected to generate 1.94 times more return on investment than Foraco International. However, Americas Silver is 1.94 times more volatile than Foraco International SA. It trades about 0.15 of its potential returns per unit of risk. Foraco International SA is currently generating about 0.08 per unit of risk. If you would invest  38.00  in Americas Silver Corp on September 13, 2024 and sell it today you would earn a total of  21.00  from holding Americas Silver Corp or generate 55.26% return on investment over 90 days.

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

Americas Silver Corp  vs.  Foraco International SA

Americas Silver Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Americas Silver Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Americas Silver displayed solid returns over the last few months and may actually be approaching a breakup point.

Foraco International

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Foraco International SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Foraco International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Americas Silver and Foraco International

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

The idea behind Americas Silver Corp and Foraco International SA 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.