Correlation Between Fortuna Silver and Transocean

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

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

Diversification Opportunities for Fortuna Silver and Transocean

-0.4

Correlation Coefficient

Fortuna Silver  Transocean

Very good diversification

The 3 months correlation between Fortuna and Transocean is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Fortuna Silver Mines and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean and Fortuna Silver 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 Fortuna Silver Mines are associated (or correlated) with Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Fortuna Silver i.e., Fortuna Silver and Transocean go up and down completely randomly.

Pair Corralation between Fortuna Silver and Transocean

Considering the 90-day investment horizon Fortuna Silver Mines is expected to generate 0.57 times more return on investment than Transocean. However, Fortuna Silver Mines is 1.76 times less risky than Transocean. It trades about 0.17 of its potential returns per unit of risk. Transocean is currently generating about -0.18 per unit of risk. If you would invest  474.00  in Fortuna Silver Mines on January 9, 2025 and sell it today you would earn a total of  64.00  from holding Fortuna Silver Mines or generate 13.5% return on investment over 90 days.

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

Fortuna Silver Mines  vs.  Transocean

Fortuna Silver Mines

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fortuna Silver Mines are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Fortuna Silver displayed solid returns over the last few months and may actually be approaching a breakup point.

Transocean

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transocean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Fortuna Silver and Transocean

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

The idea behind Fortuna Silver Mines and Transocean 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.