Correlation Between Fortuna Silver and Nexa Resources

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

By analyzing existing cross correlation between Fortuna Silver Mines and Nexa Resources SA, you can compare the effects of market volatilities on Fortuna Silver and Nexa Resources 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 Fortuna Silver with a short position of Nexa Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortuna Silver and Nexa Resources.

Diversification Opportunities for Fortuna Silver and Nexa Resources

0.6

Correlation Coefficient

Fortuna Silver  Nexa Resources

Poor diversification

The 3 months correlation between Fortuna and Nexa is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Fortuna Silver Mines and Nexa Resources SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexa Resources SA and Fortuna 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 Fortuna Silver Mines are associated (or correlated) with Nexa Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexa Resources SA has no effect on the direction of Fortuna Silver i.e., Fortuna Silver and Nexa Resources go up and down completely randomly.

Pair Corralation between Fortuna Silver and Nexa Resources

Considering the 90-day investment horizon Fortuna Silver is expected to generate 1.6 times less return on investment than Nexa Resources. In addition to that, Fortuna Silver is 1.67 times more volatile than Nexa Resources SA. It trades about 0.08 of its total potential returns per unit of risk. Nexa Resources SA is currently generating about 0.21 per unit of volatility. If you would invest  597.00  in Nexa Resources SA on September 5, 2024 and sell it today you would earn a total of  182.00  from holding Nexa Resources SA or generate 30.49% return on investment over 90 days.

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

Fortuna Silver Mines  vs.  Nexa Resources SA

Fortuna Silver Mines

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fortuna Silver Mines are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Fortuna Silver displayed solid returns over the last few months and may actually be approaching a breakup point.

Nexa Resources SA

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nexa Resources SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Nexa Resources sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortuna Silver and Nexa Resources

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

The idea behind Fortuna Silver Mines and Nexa Resources SA 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.