Correlation Between First Majestic and Litigation Capital

Can any of the company-specific risk be diversified away by investing in both First Majestic and Litigation Capital 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 Litigation Capital 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 Litigation Capital Management, you can compare the effects of market volatilities on First Majestic and Litigation Capital 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 Litigation Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Majestic and Litigation Capital.

Diversification Opportunities for First Majestic and Litigation Capital

0.39

Correlation Coefficient

First Majestic  Litigation Capital

Weak diversification

The 3 months correlation between First and Litigation is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Litigation Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litigation Capital 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 Litigation Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litigation Capital has no effect on the direction of First Majestic i.e., First Majestic and Litigation Capital go up and down completely randomly.

Pair Corralation between First Majestic and Litigation Capital

Assuming the 90 days trading horizon First Majestic Silver is expected to generate 1.56 times more return on investment than Litigation Capital. However, First Majestic is 1.56 times more volatile than Litigation Capital Management. It trades about 0.03 of its potential returns per unit of risk. Litigation Capital Management is currently generating about 0.0 per unit of risk. If you would invest  837.00  in First Majestic Silver on October 7, 2024 and sell it today you would earn a total of  17.00  from holding First Majestic Silver or generate 2.03% return on investment over 90 days.

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

First Majestic Silver  vs.  Litigation Capital Management

First Majestic Silver

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Majestic Silver are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, First Majestic may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Litigation Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Litigation Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Litigation Capital is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Majestic and Litigation Capital

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

The idea behind First Majestic Silver and Litigation Capital Management 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.