Do you think more volatility is in store for the stock market? One way to trade off of this idea is by finding stocks with strong positive correlations to volatility. To illustrate, we ran a screen.
We began by screening the basic materials sector for highly liquid stocks, with current ratios above 3. The current ratio is current assets/current liabilities, so ratios above 3 indicate the company has at least 3 times the liquid assets to cover their short-term liabilities.
We then screened for those with strong positive correlations to the volatility (VIX) index over the last two months. This indicates that these stocks have tended to outperform when market uncertainty and volatility spiked. This may bode well if the market sees more volatility in the future. Of course, past performance is no guarantee of future returns.
For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.
Tool provided by Kapitall. More investing ideas on Kapitall Wire.
Do you think these stocks would benefit from greater volatility? Use this list as a starting point for your own analysis.
List sorted by correlation with VIX over the last 60 days.
1. Richmont Mines Inc. (RIC): Engages in the acquisition, exploration, development, and operation of mining properties, principally gold in northeast Canada. Market cap at $117.57M, most recent closing price at $3.53. Current ratio at 4.14. Correlation with the VIX index at 0.644 over the last 60 days.
2. Exeter Resource Corporation (XRA): Engages in the acquisition, exploration, and development of gold deposits in the Maricunga district in Chile. Market cap at $141.36M, most recent closing price at $1.60. Current ratio at 32.5. Correlation with the VIX index at 0.521 over the last 60 days.
3. Silvercorp Metals Inc. (SVM): Engages in the acquisition, exploration, development, and operation of silver mineral properties in China and Canada. Market cap at $841.65M, most recent closing price at $4.95. Current ratio at 4.48. Correlation with the VIX index at 0.519 over the last 60 days.
4. Keegan Resources Inc. (KGN): Engages in the acquisition and exploration of gold deposits in West Africa. Market cap at $226.65M, most recent closing price at $3.01. Current ratio at 41.24. Correlation with the VIX index at 0.502 over the last 60 days.
*Price data sourced from Yahoo! Finance, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.