Correlation Between Compania and Gatos Silver

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

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

Diversification Opportunities for Compania and Gatos Silver

0.45

Correlation Coefficient

Compania  Gatos Silver

Very weak diversification

The 3 months correlation between Compania and Gatos is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Minas and Gatos Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gatos Silver and Compania 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 Compania de Minas are associated (or correlated) with Gatos Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gatos Silver has no effect on the direction of Compania i.e., Compania and Gatos Silver go up and down completely randomly.

Pair Corralation between Compania and Gatos Silver

Considering the 90-day investment horizon Compania is expected to generate 7.35 times less return on investment than Gatos Silver. But when comparing it to its historical volatility, Compania de Minas is 1.72 times less risky than Gatos Silver. It trades about 0.03 of its potential returns per unit of risk. Gatos Silver is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,167  in Gatos Silver on September 3, 2024 and sell it today you would earn a total of  379.00  from holding Gatos Silver or generate 32.48% return on investment over 90 days.

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

Compania de Minas  vs.  Gatos Silver

Compania de Minas

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Minas are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Compania is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Gatos Silver

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gatos Silver are ranked lower than 10 (%) 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.

Pair Trading with Compania and Gatos Silver

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

The idea behind Compania de Minas and Gatos 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.