Correlation Between Guanajuato Silver and Santacruz Silv

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

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

Diversification Opportunities for Guanajuato Silver and Santacruz Silv

0.69

Correlation Coefficient

Guanajuato Silver  Santacruz Silv

Poor diversification

The 3 months correlation between Guanajuato and Santacruz is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Guanajuato Silver and Santacruz Silv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santacruz Silv and Guanajuato 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 Guanajuato Silver 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 Guanajuato Silver i.e., Guanajuato Silver and Santacruz Silv go up and down completely randomly.

Pair Corralation between Guanajuato Silver and Santacruz Silv

Assuming the 90 days horizon Guanajuato Silver is expected to generate 1.75 times less return on investment than Santacruz Silv. But when comparing it to its historical volatility, Guanajuato Silver is 1.34 times less risky than Santacruz Silv. It trades about 0.13 of its potential returns per unit of risk. Santacruz Silv is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Santacruz Silv on March 7, 2024 and sell it today you would earn a total of  15.00  from holding Santacruz Silv or generate 93.75% return on investment over 90 days.

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

Guanajuato Silver  vs.  Santacruz Silv

Guanajuato Silver

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guanajuato Silver are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Guanajuato Silver reported solid returns over the last few months and may actually be approaching a breakup point.

Santacruz Silv

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Santacruz Silv are ranked lower than 12 (%) 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 Guanajuato Silver and Santacruz Silv

The main advantage of trading using opposite Guanajuato Silver and Santacruz Silv positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guanajuato Silver 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 Guanajuato Silver 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.

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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.