Correlation Between First Majestic and Aloro Mining

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

Diversification Opportunities for First Majestic and Aloro Mining

-0.06

Correlation Coefficient

First Majestic  Aloro Mining

Good diversification

The 3 months correlation between First and Aloro is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Aloro Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aloro Mining Corp 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 Aloro Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aloro Mining Corp has no effect on the direction of First Majestic i.e., First Majestic and Aloro Mining go up and down completely randomly.

Pair Corralation between First Majestic and Aloro Mining

Assuming the 90 days horizon First Majestic is expected to generate 1.92 times less return on investment than Aloro Mining. But when comparing it to its historical volatility, First Majestic Silver is 5.48 times less risky than Aloro Mining. It trades about 0.11 of its potential returns per unit of risk. Aloro Mining Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Aloro Mining Corp on December 28, 2024 and sell it today you would lose (0.50) from holding Aloro Mining Corp or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

First Majestic Silver  vs.  Aloro Mining Corp

First Majestic Silver

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Majestic Silver are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, First Majestic displayed solid returns over the last few months and may actually be approaching a breakup point.

Aloro Mining Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aloro Mining Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Aloro Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Majestic and Aloro Mining

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

The idea behind First Majestic Silver and Aloro Mining Corp 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.