Correlation Between Fortuna Silver and Dolly Varden

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

Diversification Opportunities for Fortuna Silver and Dolly Varden

0.76

Correlation Coefficient

Fortuna Silver  Dolly Varden

Poor diversification

The 3 months correlation between Fortuna and Dolly is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Fortuna Silver Mines and Dolly Varden Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dolly Varden Silver 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 Dolly Varden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dolly Varden Silver has no effect on the direction of Fortuna Silver i.e., Fortuna Silver and Dolly Varden go up and down completely randomly.

Pair Corralation between Fortuna Silver and Dolly Varden

Assuming the 90 days trading horizon Fortuna Silver Mines is expected to generate 1.07 times more return on investment than Dolly Varden. However, Fortuna Silver is 1.07 times more volatile than Dolly Varden Silver. It trades about 0.11 of its potential returns per unit of risk. Dolly Varden Silver is currently generating about 0.05 per unit of risk. If you would invest  573.00  in Fortuna Silver Mines on September 4, 2024 and sell it today you would earn a total of  128.00  from holding Fortuna Silver Mines or generate 22.34% 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.  Dolly Varden Silver

Fortuna Silver Mines

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fortuna Silver Mines are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Fortuna Silver displayed solid returns over the last few months and may actually be approaching a breakup point.

Dolly Varden Silver

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dolly Varden Silver are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Dolly Varden may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fortuna Silver and Dolly Varden

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

The idea behind Fortuna Silver Mines and Dolly Varden 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.