Correlation Between Pan American and MAG Silver
Can any of the company-specific risk be diversified away by investing in both Pan American and MAG Silver 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 Pan American and MAG Silver into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pan American Silver and MAG Silver Corp, you can compare the effects of market volatilities on Pan American and MAG Silver 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 Pan American with a short position of MAG Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan American and MAG Silver.
Diversification Opportunities for Pan American and MAG Silver
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Pan and MAG is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Pan American Silver and MAG Silver Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAG Silver Corp and Pan American 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 Pan American Silver are associated (or correlated) with MAG Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAG Silver Corp has no effect on the direction of Pan American i.e., Pan American and MAG Silver go up and down completely randomly.
Pair Corralation between Pan American and MAG Silver
Assuming the 90 days trading horizon Pan American Silver is expected to generate 0.99 times more return on investment than MAG Silver. However, Pan American Silver is 1.01 times less risky than MAG Silver. It trades about 0.19 of its potential returns per unit of risk. MAG Silver Corp is currently generating about 0.1 per unit of risk. If you would invest 2,262 in Pan American Silver on February 4, 2024 and sell it today you would earn a total of 235.00 from holding Pan American Silver or generate 10.39% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Pan American Silver vs. MAG Silver Corp
Performance |
Timeline |
Pan American Silver |
MAG Silver Corp |
Pan American and MAG Silver Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Pan American and MAG Silver
The main advantage of trading using opposite Pan American and MAG Silver positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pan American position performs unexpectedly, MAG Silver 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 MAG Silver will offset losses from the drop in MAG Silver's long position.Pan American vs. Diversified Royalty Corp | Pan American vs. Atacama Copper | Pan American vs. Kua Investments | Pan American vs. East Africa Metals |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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