Correlation Between Stampede Drilling and Pan American

Can any of the company-specific risk be diversified away by investing in both Stampede Drilling 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 Stampede Drilling and Pan American into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Stampede Drilling and Pan American Silver, you can compare the effects of market volatilities on Stampede Drilling 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 Stampede Drilling with a short position of Pan American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stampede Drilling and Pan American.

Diversification Opportunities for Stampede Drilling and Pan American

0.14

Correlation Coefficient

Stampede Drilling  Pan American

Average diversification

The 3 months correlation between Stampede and Pan is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Stampede Drilling 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 Stampede Drilling 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 Stampede Drilling 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 Stampede Drilling i.e., Stampede Drilling and Pan American go up and down completely randomly.

Pair Corralation between Stampede Drilling and Pan American

Assuming the 90 days horizon Stampede Drilling is expected to generate 2.09 times less return on investment than Pan American. In addition to that, Stampede Drilling is 1.38 times more volatile than Pan American Silver. It trades about 0.02 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  2,458  in Pan American Silver on February 7, 2024 and sell it today you would earn a total of  39.00  from holding Pan American Silver or generate 1.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Stampede Drilling  vs.  Pan American Silver

Stampede Drilling

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stampede Drilling are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Stampede Drilling may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pan American Silver

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pan American Silver are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Pan American displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stampede Drilling and Pan American

The main advantage of trading using opposite Stampede Drilling and Pan American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stampede Drilling 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.

The idea behind Stampede Drilling and Pan American Silver 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.