Correlation Between Data Communications and Silver Storm

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

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

Diversification Opportunities for Data Communications and Silver Storm

-0.35

Correlation Coefficient

Data Communications  Silver Storm

Very good diversification

The 3 months correlation between Data and Silver is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Data Communications Management and Silver Storm Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Storm Mining and Data Communications 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 Data Communications Management are associated (or correlated) with Silver Storm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Storm Mining has no effect on the direction of Data Communications i.e., Data Communications and Silver Storm go up and down completely randomly.

Pair Corralation between Data Communications and Silver Storm

Assuming the 90 days trading horizon Data Communications Management is expected to under-perform the Silver Storm. But the stock apears to be less risky and, when comparing its historical volatility, Data Communications Management is 2.26 times less risky than Silver Storm. The stock trades about -0.01 of its potential returns per unit of risk. The Silver Storm Mining is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Silver Storm Mining on April 24, 2025 and sell it today you would earn a total of  8.00  from holding Silver Storm Mining or generate 61.54% return on investment over 90 days.

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

Data Communications Management  vs.  Silver Storm Mining

Data Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Data Communications Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Data Communications is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Silver Storm Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Silver Storm Mining are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Silver Storm showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Data Communications and Silver Storm

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

The idea behind Data Communications Management and Silver Storm Mining 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.