Correlation Between Pan American and Welsbach Technology

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

Diversification Opportunities for Pan American and Welsbach Technology

-0.2

Correlation Coefficient

Pan American  Welsbach Technology

Good diversification

The 3 months correlation between Pan and Welsbach is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Pan American Silver and Welsbach Technology Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welsbach Technology 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 Welsbach Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Welsbach Technology has no effect on the direction of Pan American i.e., Pan American and Welsbach Technology go up and down completely randomly.

Pair Corralation between Pan American and Welsbach Technology

Given the investment horizon of 90 days Pan American Silver is expected to under-perform the Welsbach Technology. In addition to that, Pan American is 9.59 times more volatile than Welsbach Technology Metals. It trades about -0.12 of its total potential returns per unit of risk. Welsbach Technology Metals is currently generating about 0.29 per unit of volatility. If you would invest  1,095  in Welsbach Technology Metals on August 21, 2024 and sell it today you would earn a total of  20.00  from holding Welsbach Technology Metals or generate 1.83% return on investment over 90 days.

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

Pan American Silver  vs.  Welsbach Technology Metals

Pan American Silver

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pan American Silver are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Pan American may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Welsbach Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Welsbach Technology Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Welsbach Technology is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pan American and Welsbach Technology

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

The idea behind Pan American Silver and Welsbach Technology Metals 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.