Correlation Between First Majestic and Bravada Gold

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

Diversification Opportunities for First Majestic and Bravada Gold

0.71

Correlation Coefficient

First Majestic  Bravada Gold

Poor diversification

The 3 months correlation between First and Bravada is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Bravada Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bravada Gold 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 Bravada Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bravada Gold has no effect on the direction of First Majestic i.e., First Majestic and Bravada Gold go up and down completely randomly.

Pair Corralation between First Majestic and Bravada Gold

Assuming the 90 days horizon First Majestic Silver is expected to under-perform the Bravada Gold. But the stock apears to be less risky and, when comparing its historical volatility, First Majestic Silver is 5.0 times less risky than Bravada Gold. The stock trades about -0.18 of its potential returns per unit of risk. The Bravada Gold is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Bravada Gold on October 5, 2024 and sell it today you would lose (0.50) from holding Bravada Gold or give up 25.0% of portfolio value over 90 days.

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

First Majestic Silver  vs.  Bravada Gold

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

Bravada Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bravada Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Bravada Gold is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First Majestic and Bravada Gold

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

The idea behind First Majestic Silver and Bravada Gold 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.