Correlation Between Klondike Silver and Fjordland Exploration

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

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

Diversification Opportunities for Klondike Silver and Fjordland Exploration

0.56

Correlation Coefficient

Klondike Silver  Fjordland Exploration

Very weak diversification

The 3 months correlation between Klondike and Fjordland is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Klondike Silver Corp and Fjordland Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fjordland Exploration and Klondike 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 Klondike Silver Corp are associated (or correlated) with Fjordland Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fjordland Exploration has no effect on the direction of Klondike Silver i.e., Klondike Silver and Fjordland Exploration go up and down completely randomly.

Pair Corralation between Klondike Silver and Fjordland Exploration

Given the investment horizon of 90 days Klondike Silver Corp is expected to under-perform the Fjordland Exploration. But the stock apears to be less risky and, when comparing its historical volatility, Klondike Silver Corp is 2.58 times less risky than Fjordland Exploration. The stock trades about 0.0 of its potential returns per unit of risk. The Fjordland Exploration is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Fjordland Exploration on September 30, 2024 and sell it today you would lose (1.00) from holding Fjordland Exploration or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Klondike Silver Corp  vs.  Fjordland Exploration

Klondike Silver Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Klondike Silver Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Klondike Silver is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Fjordland Exploration

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fjordland Exploration are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Fjordland Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Klondike Silver and Fjordland Exploration

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

The idea behind Klondike Silver Corp and Fjordland Exploration 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.