Correlation Between Andean Silver and Hammer Metals
Can any of the company-specific risk be diversified away by investing in both Andean Silver and Hammer Metals 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 Andean Silver and Hammer Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Andean Silver Limited and Hammer Metals, you can compare the effects of market volatilities on Andean Silver and Hammer Metals 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 Andean Silver with a short position of Hammer Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Andean Silver and Hammer Metals.
Diversification Opportunities for Andean Silver and Hammer Metals
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Andean and Hammer is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Andean Silver Limited and Hammer Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hammer Metals and Andean 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 Andean Silver Limited are associated (or correlated) with Hammer Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hammer Metals has no effect on the direction of Andean Silver i.e., Andean Silver and Hammer Metals go up and down completely randomly.
Pair Corralation between Andean Silver and Hammer Metals
Assuming the 90 days trading horizon Andean Silver is expected to generate 1.35 times less return on investment than Hammer Metals. But when comparing it to its historical volatility, Andean Silver Limited is 1.1 times less risky than Hammer Metals. It trades about 0.07 of its potential returns per unit of risk. Hammer Metals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3.30 in Hammer Metals on October 16, 2024 and sell it today you would earn a total of 0.20 from holding Hammer Metals or generate 6.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Andean Silver Limited vs. Hammer Metals
Performance |
| Timeline |
| Andean Silver Limited |
| Hammer Metals |
Andean Silver and Hammer Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Andean Silver and Hammer Metals
The main advantage of trading using opposite Andean Silver and Hammer Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Andean Silver position performs unexpectedly, Hammer Metals 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 Hammer Metals will offset losses from the drop in Hammer Metals' long position.| Andean Silver vs. Computershare | Andean Silver vs. WiseTech Global Limited | Andean Silver vs. Truscott Mining Corp | Andean Silver vs. Queste Communications |
| Hammer Metals vs. Chalice Mining Limited | Hammer Metals vs. Andean Silver Limited | Hammer Metals vs. The Environmental Group | Hammer Metals vs. Galena Mining |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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