Correlation Between Gatos Silver and Arizona Gold

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

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

Diversification Opportunities for Gatos Silver and Arizona Gold

0.74

Correlation Coefficient

Gatos Silver  Arizona Gold

Poor diversification

The 3 months correlation between Gatos and Arizona is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Gatos Silver and Arizona Gold Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arizona Gold Silver and Gatos 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 Gatos Silver are associated (or correlated) with Arizona Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arizona Gold Silver has no effect on the direction of Gatos Silver i.e., Gatos Silver and Arizona Gold go up and down completely randomly.

Pair Corralation between Gatos Silver and Arizona Gold

Assuming the 90 days trading horizon Gatos Silver is expected to generate 1.19 times more return on investment than Arizona Gold. However, Gatos Silver is 1.19 times more volatile than Arizona Gold Silver. It trades about 0.13 of its potential returns per unit of risk. Arizona Gold Silver is currently generating about 0.11 per unit of risk. If you would invest  1,670  in Gatos Silver on September 5, 2024 and sell it today you would earn a total of  576.00  from holding Gatos Silver or generate 34.49% return on investment over 90 days.

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

Gatos Silver  vs.  Arizona Gold Silver

Gatos Silver

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gatos Silver are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Gatos Silver displayed solid returns over the last few months and may actually be approaching a breakup point.

Arizona Gold Silver

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arizona Gold Silver are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Arizona Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gatos Silver and Arizona Gold

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

The idea behind Gatos Silver and Arizona Gold 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.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.