Correlation Between First Majestic and Almaden Minerals

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

Diversification Opportunities for First Majestic and Almaden Minerals

0.01

Correlation Coefficient

First Majestic  Almaden Minerals

Significant diversification

The 3 months correlation between First and Almaden is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Almaden Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Almaden Minerals 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 Almaden Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Almaden Minerals has no effect on the direction of First Majestic i.e., First Majestic and Almaden Minerals go up and down completely randomly.

Pair Corralation between First Majestic and Almaden Minerals

Assuming the 90 days horizon First Majestic Silver is expected to under-perform the Almaden Minerals. But the stock apears to be less risky and, when comparing its historical volatility, First Majestic Silver is 2.81 times less risky than Almaden Minerals. The stock trades about -0.11 of its potential returns per unit of risk. The Almaden Minerals is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Almaden Minerals on October 23, 2024 and sell it today you would earn a total of  6.00  from holding Almaden Minerals or generate 85.71% return on investment over 90 days.

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

First Majestic Silver  vs.  Almaden Minerals

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Almaden Minerals

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Almaden Minerals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal primary indicators, Almaden Minerals displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Majestic and Almaden Minerals

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

The idea behind First Majestic Silver and Almaden Minerals 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.