Correlation Between Andean Precious and Santacruz Silv

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

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

Diversification Opportunities for Andean Precious and Santacruz Silv

0.7

Correlation Coefficient

Andean Precious  Santacruz Silv

Poor diversification

The 3 months correlation between Andean and Santacruz is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Andean Precious Metals and Santacruz Silv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santacruz Silv and Andean Precious 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 Andean Precious Metals are associated (or correlated) with Santacruz Silv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santacruz Silv has no effect on the direction of Andean Precious i.e., Andean Precious and Santacruz Silv go up and down completely randomly.

Pair Corralation between Andean Precious and Santacruz Silv

Assuming the 90 days horizon Andean Precious is expected to generate 4.79 times less return on investment than Santacruz Silv. But when comparing it to its historical volatility, Andean Precious Metals is 1.64 times less risky than Santacruz Silv. It trades about 0.01 of its potential returns per unit of risk. Santacruz Silv is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  33.00  in Santacruz Silv on February 26, 2024 and sell it today you would lose (1.00) from holding Santacruz Silv or give up 3.03% of portfolio value over 90 days.

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

Andean Precious Metals  vs.  Santacruz Silv

Andean Precious Metals

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Andean Precious Metals are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain primary indicators, Andean Precious reported solid returns over the last few months and may actually be approaching a breakup point.

Santacruz Silv

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Andean Precious and Santacruz Silv

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

The idea behind Andean Precious Metals and Santacruz Silv 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.