Correlation Between First Majestic and Gamma Communications

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

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

Diversification Opportunities for First Majestic and Gamma Communications

0.45

Correlation Coefficient

First Majestic  Gamma Communications

Very weak diversification

The 3 months correlation between First and Gamma is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Gamma Communications PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamma Communications PLC and First Majestic 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 First Majestic Silver are associated (or correlated) with Gamma Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamma Communications PLC has no effect on the direction of First Majestic i.e., First Majestic and Gamma Communications go up and down completely randomly.

Pair Corralation between First Majestic and Gamma Communications

Assuming the 90 days trading horizon First Majestic is expected to generate 1.52 times less return on investment than Gamma Communications. In addition to that, First Majestic is 2.53 times more volatile than Gamma Communications PLC. It trades about 0.01 of its total potential returns per unit of risk. Gamma Communications PLC is currently generating about 0.03 per unit of volatility. If you would invest  116,802  in Gamma Communications PLC on October 24, 2024 and sell it today you would earn a total of  18,598  from holding Gamma Communications PLC or generate 15.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

First Majestic Silver  vs.  Gamma Communications PLC

First Majestic Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Majestic Silver has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Gamma Communications PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gamma Communications PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with First Majestic and Gamma Communications

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

The idea behind First Majestic Silver and Gamma Communications PLC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.