Correlation Between Pan American and B2Gold Corp

Can any of the company-specific risk be diversified away by investing in both Pan American and B2Gold Corp 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 B2Gold Corp 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 B2Gold Corp, you can compare the effects of market volatilities on Pan American and B2Gold Corp 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 B2Gold Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan American and B2Gold Corp.

Diversification Opportunities for Pan American and B2Gold Corp

0.49

Correlation Coefficient

Pan American  B2Gold Corp

Very weak diversification

The 3 months correlation between Pan and B2Gold is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Pan American Silver and B2Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B2Gold 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 B2Gold Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B2Gold Corp has no effect on the direction of Pan American i.e., Pan American and B2Gold Corp go up and down completely randomly.

Pair Corralation between Pan American and B2Gold Corp

Given the investment horizon of 90 days Pan American Silver is expected to generate 1.04 times more return on investment than B2Gold Corp. However, Pan American is 1.04 times more volatile than B2Gold Corp. It trades about 0.03 of its potential returns per unit of risk. B2Gold Corp is currently generating about -0.23 per unit of risk. If you would invest  1,807  in Pan American Silver on February 6, 2024 and sell it today you would earn a total of  18.00  from holding Pan American Silver or generate 1.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Pan American Silver  vs.  B2Gold Corp

Pan American Silver

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pan American Silver are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Pan American unveiled solid returns over the last few months and may actually be approaching a breakup point.

B2Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days B2Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, B2Gold Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pan American and B2Gold Corp

The main advantage of trading using opposite Pan American and B2Gold Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pan American position performs unexpectedly, B2Gold Corp 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 B2Gold Corp will offset losses from the drop in B2Gold Corp's long position.

The idea behind Pan American Silver and B2Gold Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.