Correlation Between Gatos Silver and ASE Industrial

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

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

Diversification Opportunities for Gatos Silver and ASE Industrial

0.68

Correlation Coefficient

Gatos Silver  ASE Industrial

Poor diversification

The 3 months correlation between Gatos and ASE is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Gatos Silver and ASE Industrial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASE Industrial Holding and Gatos 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 Gatos Silver are associated (or correlated) with ASE Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASE Industrial Holding has no effect on the direction of Gatos Silver i.e., Gatos Silver and ASE Industrial go up and down completely randomly.

Pair Corralation between Gatos Silver and ASE Industrial

Given the investment horizon of 90 days Gatos Silver is expected to generate 1.8 times more return on investment than ASE Industrial. However, Gatos Silver is 1.8 times more volatile than ASE Industrial Holding. It trades about 0.33 of its potential returns per unit of risk. ASE Industrial Holding is currently generating about -0.23 per unit of risk. If you would invest  839.00  in Gatos Silver on January 28, 2024 and sell it today you would earn a total of  185.00  from holding Gatos Silver or generate 22.05% return on investment over 90 days.

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

Gatos Silver  vs.  ASE Industrial Holding

Gatos Silver

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gatos Silver are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Gatos Silver displayed solid returns over the last few months and may actually be approaching a breakup point.

ASE Industrial Holding

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ASE Industrial Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, ASE Industrial may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Gatos Silver and ASE Industrial

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

The idea behind Gatos Silver and ASE Industrial Holding 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.