Correlation Between Agnico Eagle and Pan American

Can any of the company-specific risk be diversified away by investing in both Agnico Eagle and Pan American 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 Agnico Eagle and Pan American into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Agnico Eagle and Pan American

0.77

Correlation Coefficient

Agnico Eagle  Pan American

Poor diversification

The 3 months correlation between Agnico and Pan is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Agnico Eagle Mines and Pan American Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan American Silver and Agnico Eagle 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 Agnico Eagle Mines are associated (or correlated) with Pan American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan American Silver has no effect on the direction of Agnico Eagle i.e., Agnico Eagle and Pan American go up and down completely randomly.

Pair Corralation between Agnico Eagle and Pan American

Considering the 90-day investment horizon Agnico Eagle is expected to generate 2.02 times less return on investment than Pan American. But when comparing it to its historical volatility, Agnico Eagle Mines is 1.49 times less risky than Pan American. It trades about 0.07 of its potential returns per unit of risk. Pan American Silver is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,906  in Pan American Silver on September 2, 2024 and sell it today you would earn a total of  291.00  from holding Pan American Silver or generate 15.27% return on investment over 90 days.

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

Agnico Eagle Mines  vs.  Pan American Silver

Agnico Eagle Mines

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Agnico Eagle Mines are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Agnico Eagle may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pan American Silver

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pan American Silver are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Pan American unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agnico Eagle and Pan American

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

The idea behind Agnico Eagle Mines and Pan American Silver 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.