Correlation Between Gatos Silver and Air France-KLM

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Can any of the company-specific risk be diversified away by investing in both Gatos Silver and Air France-KLM 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 Gatos Silver and Air France-KLM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gatos Silver and Air France KLM SA, you can compare the effects of market volatilities on Gatos Silver and Air France-KLM 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 Gatos Silver with a short position of Air France-KLM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gatos Silver and Air France-KLM.

Diversification Opportunities for Gatos Silver and Air France-KLM

-0.64
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Gatos and Air is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Gatos Silver and Air France-KLM SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air France-KLM SA and Gatos 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 Gatos Silver are associated (or correlated) with Air France-KLM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air France-KLM SA has no effect on the direction of Gatos Silver i.e., Gatos Silver and Air France-KLM go up and down completely randomly.

Pair Corralation between Gatos Silver and Air France-KLM

Given the investment horizon of 90 days Gatos Silver is expected to generate 1.5 times more return on investment than Air France-KLM. However, Gatos Silver is 1.5 times more volatile than Air France KLM SA. It trades about 0.44 of its potential returns per unit of risk. Air France KLM SA is currently generating about -0.13 per unit of risk. If you would invest  572.00  in Gatos Silver on December 30, 2023 and sell it today you would earn a total of  267.00  from holding Gatos Silver or generate 46.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Gatos Silver  vs.  Air France-KLM SA

 Performance 
       Timeline  
Gatos Silver 

Risk-Adjusted Performance

11 of 100

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

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Air France KLM SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Gatos Silver and Air France-KLM Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gatos Silver and Air France-KLM

The main advantage of trading using opposite Gatos Silver and Air France-KLM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gatos Silver position performs unexpectedly, Air France-KLM 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 Air France-KLM will offset losses from the drop in Air France-KLM's long position.
The idea behind Gatos Silver and Air France KLM 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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