Correlation Between Barrick Gold and Pan American
Can any of the company-specific risk be diversified away by investing in both Barrick Gold and Pan American 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 Barrick Gold and Pan American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barrick Gold Corp and Pan American Silver, you can compare the effects of market volatilities on Barrick Gold and Pan American 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 Barrick Gold with a short position of Pan American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barrick Gold and Pan American.
Diversification Opportunities for Barrick Gold and Pan American
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Barrick and Pan is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Barrick Gold Corp and Pan American Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan American Silver and Barrick Gold 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 Barrick Gold Corp are associated (or correlated) with Pan American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan American Silver has no effect on the direction of Barrick Gold i.e., Barrick Gold and Pan American go up and down completely randomly.
Pair Corralation between Barrick Gold and Pan American
Given the investment horizon of 90 days Barrick Gold is expected to generate 1.1 times less return on investment than Pan American. But when comparing it to its historical volatility, Barrick Gold Corp is 1.36 times less risky than Pan American. It trades about 0.03 of its potential returns per unit of risk. Pan American Silver is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,242 in Pan American Silver on August 24, 2024 and sell it today you would earn a total of 49.00 from holding Pan American Silver or generate 2.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barrick Gold Corp vs. Pan American Silver
Performance |
| Timeline |
| Barrick Gold Corp |
| Pan American Silver |
Barrick Gold and Pan American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barrick Gold and Pan American
The main advantage of trading using opposite Barrick Gold and Pan American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barrick Gold position performs unexpectedly, Pan American 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 Pan American will offset losses from the drop in Pan American's long position.| Barrick Gold vs. Agnico Eagle Mines | Barrick Gold vs. Pan American Silver | Barrick Gold vs. Kinross Gold | Barrick Gold vs. B2Gold Corp |
| Pan American vs. Newmont Goldcorp Corp | Pan American vs. Wheaton Precious Metals | Pan American vs. Franco Nevada | Pan American vs. Kinross Gold |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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