Correlation Between United States and Pan American
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and Pan American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and Pan American Silver, you can compare the effects of market volatilities on United States 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 United States with a short position of Pan American. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Pan American.
Diversification Opportunities for United States and Pan American
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Pan is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel 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 United States 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 United States Steel 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 United States i.e., United States and Pan American go up and down completely randomly.
Pair Corralation between United States and Pan American
Taking into account the 90-day investment horizon United States is expected to generate 1.04 times less return on investment than Pan American. In addition to that, United States is 1.14 times more volatile than Pan American Silver. It trades about 0.03 of its total potential returns per unit of risk. Pan American Silver is currently generating about 0.04 per unit of volatility. If you would invest 1,622 in Pan American Silver on August 27, 2024 and sell it today you would earn a total of 636.00 from holding Pan American Silver or generate 39.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. Pan American Silver
Performance |
| Timeline |
| United States Steel |
| Pan American Silver |
United States and Pan American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Pan American
The main advantage of trading using opposite United States and Pan American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. Nucor Corp | United States vs. Steel Dynamics | United States vs. ArcelorMittal SA ADR | United States vs. Gerdau SA ADR |
| 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 CEOs Directory module to screen CEOs from public companies around the world.
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