Correlation Between Gatos Silver and Gold Royalty

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

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

Diversification Opportunities for Gatos Silver and Gold Royalty

0.75

Correlation Coefficient

Gatos Silver  Gold Royalty

Poor diversification

The 3 months correlation between Gatos and Gold is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Gatos Silver and Gold Royalty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Royalty Corp 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 Gold Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Royalty Corp has no effect on the direction of Gatos Silver i.e., Gatos Silver and Gold Royalty go up and down completely randomly.

Pair Corralation between Gatos Silver and Gold Royalty

Given the investment horizon of 90 days Gatos Silver is expected to generate 1.26 times more return on investment than Gold Royalty. However, Gatos Silver is 1.26 times more volatile than Gold Royalty Corp. It trades about 0.09 of its potential returns per unit of risk. Gold Royalty Corp is currently generating about 0.01 per unit of risk. If you would invest  505.00  in Gatos Silver on January 19, 2024 and sell it today you would earn a total of  456.00  from holding Gatos Silver or generate 90.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.56%
Values	Daily Returns

Gatos Silver  vs.  Gold Royalty Corp

Gatos Silver

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gatos Silver are ranked lower than 16 (%) 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.

Gold Royalty Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Royalty Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Gold Royalty showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gatos Silver and Gold Royalty

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

The idea behind Gatos Silver and Gold Royalty Corp 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.