Correlation Between Gatos Silver and Globex Mining

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

By analyzing existing cross correlation between Gatos Silver and Globex Mining Enterprises, you can compare the effects of market volatilities on Gatos Silver and Globex Mining 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 Globex Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gatos Silver and Globex Mining.

Diversification Opportunities for Gatos Silver and Globex Mining

0.69

Correlation Coefficient

Gatos Silver  Globex Mining

Poor diversification

The 3 months correlation between Gatos and Globex is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Gatos Silver and Globex Mining Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globex Mining Enterprises 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 Globex Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globex Mining Enterprises has no effect on the direction of Gatos Silver i.e., Gatos Silver and Globex Mining go up and down completely randomly.

Pair Corralation between Gatos Silver and Globex Mining

Given the investment horizon of 90 days Gatos Silver is expected to generate 1.25 times less return on investment than Globex Mining. But when comparing it to its historical volatility, Gatos Silver is 1.05 times less risky than Globex Mining. It trades about 0.3 of its potential returns per unit of risk. Globex Mining Enterprises is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  63.00  in Globex Mining Enterprises on January 24, 2024 and sell it today you would earn a total of  13.00  from holding Globex Mining Enterprises or generate 20.63% return on investment over 90 days.

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

Gatos Silver  vs.  Globex Mining Enterprises

Gatos Silver

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gatos Silver are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Gatos Silver displayed solid returns over the last few months and may actually be approaching a breakup point.

Globex Mining Enterprises

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Globex Mining Enterprises are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Globex Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gatos Silver and Globex Mining

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

The idea behind Gatos Silver and Globex Mining Enterprises 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.