Correlation Between Compania and Sierra Madre
Can any of the company-specific risk be diversified away by investing in both Compania 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 Compania and Sierra Madre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compania de Minas and Sierra Madre Gold, you can compare the effects of market volatilities on Compania 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 Compania with a short position of Sierra Madre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and Sierra Madre.
Diversification Opportunities for Compania and Sierra Madre
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Compania and Sierra is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Minas 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 Compania 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 Compania de Minas 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 Compania i.e., Compania and Sierra Madre go up and down completely randomly.
Pair Corralation between Compania and Sierra Madre
Considering the 90-day investment horizon Compania de Minas is expected to generate 0.34 times more return on investment than Sierra Madre. However, Compania de Minas is 2.92 times less risky than Sierra Madre. It trades about -0.1 of its potential returns per unit of risk. Sierra Madre Gold is currently generating about -0.25 per unit of risk. If you would invest 1,264 in Compania de Minas on September 2, 2024 and sell it today you would lose (54.00) from holding Compania de Minas or give up 4.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compania de Minas vs. Sierra Madre Gold
Performance |
| Timeline |
| Compania de Minas |
| Sierra Madre Gold |
Compania and Sierra Madre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compania and Sierra Madre
The main advantage of trading using opposite Compania and Sierra Madre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania 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.| Compania vs. Gold Royalty Corp | Compania vs. SilverCrest Metals | Compania vs. McEwen Mining | Compania vs. Hecla Mining |
| Sierra Madre vs. Equity Metals | Sierra Madre vs. Silver Wolf Exploration | Sierra Madre vs. Western Alaska Minerals | Sierra Madre vs. Summa Silver Corp |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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