Correlation Between First Majestic and London Security

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

Diversification Opportunities for First Majestic and London Security

0.37

Correlation Coefficient

First Majestic  London Security

Weak diversification

The 3 months correlation between First and London is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and London Security Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Security 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 London Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Security Plc has no effect on the direction of First Majestic i.e., First Majestic and London Security go up and down completely randomly.

Pair Corralation between First Majestic and London Security

Assuming the 90 days trading horizon First Majestic Silver is expected to under-perform the London Security. In addition to that, First Majestic is 2.64 times more volatile than London Security Plc. It trades about -0.11 of its total potential returns per unit of risk. London Security Plc is currently generating about -0.05 per unit of volatility. If you would invest  357,000  in London Security Plc on October 26, 2024 and sell it today you would lose (17,000) from holding London Security Plc or give up 4.76% of portfolio value over 90 days.

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

First Majestic Silver  vs.  London Security 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 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.

London Security Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days London Security Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, London Security 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 London Security

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

The idea behind First Majestic Silver and London Security 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.