Correlation Between MAG Silver and Silvercorp Metals

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

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

Diversification Opportunities for MAG Silver and Silvercorp Metals

0.9

Correlation Coefficient

MAG Silver  Silvercorp Metals

Almost no diversification

The 3 months correlation between MAG and Silvercorp is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding MAG Silver Corp and Silvercorp Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silvercorp Metals and MAG 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 MAG Silver Corp are associated (or correlated) with Silvercorp Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silvercorp Metals has no effect on the direction of MAG Silver i.e., MAG Silver and Silvercorp Metals go up and down completely randomly.

Pair Corralation between MAG Silver and Silvercorp Metals

Considering the 90-day investment horizon MAG Silver Corp is expected to generate 1.2 times more return on investment than Silvercorp Metals. However, MAG Silver is 1.2 times more volatile than Silvercorp Metals. It trades about 0.33 of its potential returns per unit of risk. Silvercorp Metals is currently generating about 0.25 per unit of risk. If you would invest  956.00  in MAG Silver Corp on January 20, 2024 and sell it today you would earn a total of  284.00  from holding MAG Silver Corp or generate 29.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

MAG Silver Corp  vs.  Silvercorp Metals

MAG Silver Corp

Risk-Adjusted Performance

12 of 100

Good

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

Silvercorp Metals

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Silvercorp Metals are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Silvercorp Metals displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MAG Silver and Silvercorp Metals

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

The idea behind MAG Silver Corp and Silvercorp Metals 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.