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

0.38

Correlation Coefficient

First Majestic  B2Gold Corp

Weak diversification

The 3 months correlation between First and B2Gold is 0.38. 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 under-perform the B2Gold Corp. In addition to that, First Majestic is 1.6 times more volatile than B2Gold Corp. It trades about -0.02 of its total potential returns per unit of risk. B2Gold Corp is currently generating about 0.01 per unit of volatility. If you would invest  388.00  in B2Gold Corp on December 1, 2024 and sell it today you would lose (1.00) from holding B2Gold Corp or give up 0.26% 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.  B2Gold Corp

First Majestic Silver

Risk-Adjusted Performance

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 very healthy basic indicators, First Majestic is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

B2Gold Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days B2Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, B2Gold Corp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.