Correlation Between First Majestic and B2Gold Corp

Can any of the company-specific risk be diversified away by investing in both First Majestic and B2Gold Corp 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 B2Gold Corp 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 B2Gold Corp, you can compare the effects of market volatilities on First Majestic and B2Gold Corp 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 B2Gold Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Majestic and B2Gold Corp.

Diversification Opportunities for First Majestic and B2Gold Corp

0.78

Correlation Coefficient

First Majestic  B2Gold Corp

Poor diversification

The 3 months correlation between First and B2Gold is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and B2Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B2Gold 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 B2Gold Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B2Gold Corp has no effect on the direction of First Majestic i.e., First Majestic and B2Gold Corp go up and down completely randomly.

Pair Corralation between First Majestic and B2Gold Corp

Assuming the 90 days horizon First Majestic Silver is expected to generate 1.4 times more return on investment than B2Gold Corp. However, First Majestic is 1.4 times more volatile than B2Gold Corp. It trades about 0.11 of its potential returns per unit of risk. B2Gold Corp is currently generating about 0.12 per unit of risk. If you would invest  776.00  in First Majestic Silver on December 29, 2024 and sell it today you would earn a total of  190.00  from holding First Majestic Silver or generate 24.48% return on investment over 90 days.

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

First Majestic Silver  vs.  B2Gold 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.

B2Gold Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in B2Gold Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, B2Gold Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Majestic and B2Gold Corp

The main advantage of trading using opposite First Majestic and B2Gold Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Majestic position performs unexpectedly, B2Gold Corp 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 B2Gold Corp will offset losses from the drop in B2Gold Corp's long position.

The idea behind First Majestic Silver and B2Gold 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.

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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.