Correlation Between Compania and Silver Scott

Can any of the company-specific risk be diversified away by investing in both Compania and Silver Scott 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 Silver Scott 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 Silver Scott Mines, you can compare the effects of market volatilities on Compania and Silver Scott 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 Silver Scott. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and Silver Scott.

Diversification Opportunities for Compania and Silver Scott

0.51

Correlation Coefficient

Compania  Silver Scott

Very weak diversification

The 3 months correlation between Compania and Silver is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Minas and Silver Scott Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Scott Mines 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 Silver Scott. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Scott Mines has no effect on the direction of Compania i.e., Compania and Silver Scott go up and down completely randomly.

Pair Corralation between Compania and Silver Scott

Considering the 90-day investment horizon Compania de Minas is expected to under-perform the Silver Scott. But the stock apears to be less risky and, when comparing its historical volatility, Compania de Minas is 14.18 times less risky than Silver Scott. The stock trades about -0.03 of its potential returns per unit of risk. The Silver Scott Mines is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4.58  in Silver Scott Mines on September 23, 2024 and sell it today you would lose (2.58) from holding Silver Scott Mines or give up 56.33% of portfolio value over 90 days.

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

Compania de Minas  vs.  Silver Scott Mines

Compania de Minas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compania de Minas has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Silver Scott Mines

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Silver Scott Mines are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, Silver Scott unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compania and Silver Scott

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

The idea behind Compania de Minas and Silver Scott Mines 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.