Correlation Between Defiance Silver and Gatos Silver

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

Diversification Opportunities for Defiance Silver and Gatos Silver

0.69

Correlation Coefficient

Defiance Silver  Gatos Silver

Poor diversification

The 3 months correlation between Defiance and Gatos is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Defiance Silver Corp and Gatos Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gatos Silver 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 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 Defiance Silver i.e., Defiance Silver and Gatos Silver go up and down completely randomly.

Pair Corralation between Defiance Silver and Gatos Silver

Assuming the 90 days horizon Defiance Silver is expected to generate 1.21 times less return on investment than Gatos Silver. In addition to that, Defiance Silver is 1.8 times more volatile than Gatos Silver. It trades about 0.04 of its total potential returns per unit of risk. Gatos Silver is currently generating about 0.09 per unit of volatility. If you would invest  580.00  in Gatos Silver on September 14, 2024 and sell it today you would earn a total of  1,642  from holding Gatos Silver or generate 283.1% return on investment over 90 days.

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

Defiance Silver Corp  vs.  Gatos Silver

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.

Gatos Silver

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gatos Silver are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Gatos Silver may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Defiance Silver and Gatos Silver

The main advantage of trading using opposite Defiance Silver and Gatos Silver positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Defiance Silver 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 Defiance Silver Corp 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.