Correlation Between Summa Silver and Sierra Madre

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

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

Diversification Opportunities for Summa Silver and Sierra Madre

0.71

Correlation Coefficient

Summa Silver  Sierra Madre

Poor diversification

The 3 months correlation between Summa and Sierra is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Summa Silver Corp and Sierra Madre Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Madre Gold and Summa 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 Summa Silver Corp are associated (or correlated) with Sierra Madre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra Madre Gold has no effect on the direction of Summa Silver i.e., Summa Silver and Sierra Madre go up and down completely randomly.

Pair Corralation between Summa Silver and Sierra Madre

Assuming the 90 days horizon Summa Silver Corp is expected to under-perform the Sierra Madre. But the otc stock apears to be less risky and, when comparing its historical volatility, Summa Silver Corp is 1.44 times less risky than Sierra Madre. The otc stock trades about -0.07 of its potential returns per unit of risk. The Sierra Madre Gold is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  39.00  in Sierra Madre Gold on September 2, 2024 and sell it today you would lose (9.00) from holding Sierra Madre Gold or give up 23.08% of portfolio value over 90 days.

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

Summa Silver Corp  vs.  Sierra Madre Gold

Summa Silver Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Summa Silver Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Sierra Madre Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sierra Madre Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Summa Silver and Sierra Madre

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

The idea behind Summa Silver Corp and Sierra Madre Gold 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..