Correlation Between First Majestic and Conquest Resources

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

Diversification Opportunities for First Majestic and Conquest Resources

-0.13

Correlation Coefficient

First Majestic  Conquest Resources

Good diversification

The 3 months correlation between First and Conquest is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Conquest Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conquest Resources 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 Conquest Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conquest Resources has no effect on the direction of First Majestic i.e., First Majestic and Conquest Resources go up and down completely randomly.

Pair Corralation between First Majestic and Conquest Resources

Assuming the 90 days horizon First Majestic is expected to generate 1.14 times less return on investment than Conquest Resources. But when comparing it to its historical volatility, First Majestic Silver is 2.62 times less risky than Conquest Resources. It trades about 0.02 of its potential returns per unit of risk. Conquest Resources is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Conquest Resources on September 5, 2024 and sell it today you would lose (1.00) from holding Conquest Resources or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

First Majestic Silver  vs.  Conquest Resources

First Majestic Silver

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Majestic Silver are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, First Majestic displayed solid returns over the last few months and may actually be approaching a breakup point.

Conquest Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with First Majestic and Conquest Resources

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

The idea behind First Majestic Silver and Conquest Resources 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.