Correlation Between Defiance Silver and Anglo American

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

Diversification Opportunities for Defiance Silver and Anglo American

0.36

Correlation Coefficient

Defiance Silver  Anglo American

Weak diversification

The 3 months correlation between Defiance and Anglo is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Defiance Silver Corp and Anglo American Platinum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anglo American Platinum 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 Anglo American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anglo American Platinum has no effect on the direction of Defiance Silver i.e., Defiance Silver and Anglo American go up and down completely randomly.

Pair Corralation between Defiance Silver and Anglo American

Assuming the 90 days horizon Defiance Silver Corp is expected to generate 1.47 times more return on investment than Anglo American. However, Defiance Silver is 1.47 times more volatile than Anglo American Platinum. It trades about 0.02 of its potential returns per unit of risk. Anglo American Platinum is currently generating about -0.01 per unit of risk. If you would invest  17.00  in Defiance Silver Corp on August 31, 2024 and sell it today you would lose (1.00) from holding Defiance Silver Corp or give up 5.88% of portfolio value over 90 days.

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

Defiance Silver Corp  vs.  Anglo American Platinum

Defiance Silver Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Defiance Silver Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Defiance Silver may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Anglo American Platinum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anglo American Platinum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Anglo American is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Defiance Silver and Anglo American

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

The idea behind Defiance Silver Corp and Anglo American Platinum 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.