Correlation Between First Majestic and Dios Exploration

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

Diversification Opportunities for First Majestic and Dios Exploration

0.52

Correlation Coefficient

First Majestic  Dios Exploration

Very weak diversification

The 3 months correlation between First and Dios is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Dios Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dios Exploration 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 Dios Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dios Exploration has no effect on the direction of First Majestic i.e., First Majestic and Dios Exploration go up and down completely randomly.

Pair Corralation between First Majestic and Dios Exploration

Assuming the 90 days horizon First Majestic is expected to generate 1.03 times less return on investment than Dios Exploration. But when comparing it to its historical volatility, First Majestic Silver is 1.75 times less risky than Dios Exploration. It trades about 0.14 of its potential returns per unit of risk. Dios Exploration is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Dios Exploration on December 19, 2024 and sell it today you would earn a total of  0.50  from holding Dios Exploration or generate 25.0% return on investment over 90 days.

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

First Majestic Silver  vs.  Dios Exploration

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 10 (%) 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.

Dios Exploration

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dios Exploration are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Dios Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Majestic and Dios Exploration

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

The idea behind First Majestic Silver and Dios Exploration 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.