Correlation Between Austral Gold and Southern Silver

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

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

Diversification Opportunities for Austral Gold and Southern Silver

0.26

Correlation Coefficient

Austral Gold  Southern Silver

Modest diversification

The 3 months correlation between Austral and Southern is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Austral Gold Limited and Southern Silver Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Silver Expl and Austral Gold 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 Austral Gold Limited are associated (or correlated) with Southern Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Silver Expl has no effect on the direction of Austral Gold i.e., Austral Gold and Southern Silver go up and down completely randomly.

Pair Corralation between Austral Gold and Southern Silver

Assuming the 90 days horizon Austral Gold Limited is expected to generate 6.56 times more return on investment than Southern Silver. However, Austral Gold is 6.56 times more volatile than Southern Silver Exploration. It trades about 0.15 of its potential returns per unit of risk. Southern Silver Exploration is currently generating about -0.01 per unit of risk. If you would invest  2.00  in Austral Gold Limited on September 2, 2024 and sell it today you would earn a total of  0.06  from holding Austral Gold Limited or generate 3.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Austral Gold Limited  vs.  Southern Silver Exploration

Austral Gold Limited

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Austral Gold Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Austral Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Southern Silver Expl

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Silver Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Southern Silver is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Austral Gold and Southern Silver

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

The idea behind Austral Gold Limited and Southern Silver Exploration 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.