Correlation Between Defiance Silver and Chesapeake Gold

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

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

Diversification Opportunities for Defiance Silver and Chesapeake Gold

0.74

Correlation Coefficient

Defiance Silver  Chesapeake Gold

Poor diversification

The 3 months correlation between Defiance and Chesapeake is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Defiance Silver Corp and Chesapeake Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Gold Corp and Defiance 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 Defiance Silver Corp are associated (or correlated) with Chesapeake Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Gold Corp has no effect on the direction of Defiance Silver i.e., Defiance Silver and Chesapeake Gold go up and down completely randomly.

Pair Corralation between Defiance Silver and Chesapeake Gold

Assuming the 90 days horizon Defiance Silver Corp is expected to generate 1.33 times more return on investment than Chesapeake Gold. However, Defiance Silver is 1.33 times more volatile than Chesapeake Gold Corp. It trades about -0.02 of its potential returns per unit of risk. Chesapeake Gold Corp is currently generating about -0.18 per unit of risk. If you would invest  28.00  in Defiance Silver Corp on September 14, 2024 and sell it today you would lose (6.00) from holding Defiance Silver Corp or give up 21.43% of portfolio value over 90 days.

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

Defiance Silver Corp  vs.  Chesapeake Gold Corp

Defiance Silver Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Defiance Silver Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Chesapeake Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chesapeake Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Defiance Silver and Chesapeake Gold

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

The idea behind Defiance Silver Corp and Chesapeake Gold Corp 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.