Correlation Between Defiance Silver and Eskay Mining

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

Diversification Opportunities for Defiance Silver and Eskay Mining

0.33

Correlation Coefficient

Defiance Silver  Eskay Mining

Weak diversification

The 3 months correlation between Defiance and Eskay is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Defiance Silver Corp and Eskay Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eskay Mining 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 Eskay Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eskay Mining Corp has no effect on the direction of Defiance Silver i.e., Defiance Silver and Eskay Mining go up and down completely randomly.

Pair Corralation between Defiance Silver and Eskay Mining

Assuming the 90 days horizon Defiance Silver Corp is expected to generate 1.43 times more return on investment than Eskay Mining. However, Defiance Silver is 1.43 times more volatile than Eskay Mining Corp. It trades about 0.07 of its potential returns per unit of risk. Eskay Mining Corp is currently generating about -0.03 per unit of risk. If you would invest  14.00  in Defiance Silver Corp on September 13, 2024 and sell it today you would earn a total of  11.00  from holding Defiance Silver Corp or generate 78.57% return on investment over 90 days.

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

Defiance Silver Corp  vs.  Eskay Mining 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 fairly stable basic indicators, Defiance Silver is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Eskay Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eskay Mining 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.

Pair Trading with Defiance Silver and Eskay Mining

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

The idea behind Defiance Silver Corp and Eskay Mining 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.