Correlation Between Lion One and Gatos Silver

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

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

Diversification Opportunities for Lion One and Gatos Silver

0.48

Correlation Coefficient

Lion One  Gatos Silver

Very weak diversification

The 3 months correlation between Lion and Gatos is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals and Gatos Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gatos Silver and Lion One 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 Lion One Metals are associated (or correlated) with Gatos Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gatos Silver has no effect on the direction of Lion One i.e., Lion One and Gatos Silver go up and down completely randomly.

Pair Corralation between Lion One and Gatos Silver

Assuming the 90 days horizon Lion One Metals is expected to under-perform the Gatos Silver. But the stock apears to be less risky and, when comparing its historical volatility, Lion One Metals is 1.06 times less risky than Gatos Silver. The stock trades about -0.05 of its potential returns per unit of risk. The Gatos Silver is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,057  in Gatos Silver on September 23, 2024 and sell it today you would lose (67.00) from holding Gatos Silver or give up 3.26% of portfolio value over 90 days.

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

Lion One Metals  vs.  Gatos Silver

Lion One Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion One Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Gatos Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gatos Silver has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Gatos Silver is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Lion One and Gatos Silver

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

The idea behind Lion One Metals and Gatos 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 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.