Correlation Between First Majestic and Discovery Silver

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

Diversification Opportunities for First Majestic and Discovery Silver

0.45

Correlation Coefficient

First Majestic  Discovery Silver

Very weak diversification

The 3 months correlation between First and Discovery is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Discovery Silver Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discovery Silver 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 Discovery Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discovery Silver Corp has no effect on the direction of First Majestic i.e., First Majestic and Discovery Silver go up and down completely randomly.

Pair Corralation between First Majestic and Discovery Silver

Assuming the 90 days horizon First Majestic is expected to generate 4.27 times less return on investment than Discovery Silver. But when comparing it to its historical volatility, First Majestic Silver is 1.49 times less risky than Discovery Silver. It trades about 0.12 of its potential returns per unit of risk. Discovery Silver Corp is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  70.00  in Discovery Silver Corp on December 22, 2024 and sell it today you would earn a total of  134.00  from holding Discovery Silver Corp or generate 191.43% 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.  Discovery Silver 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 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, First Majestic displayed solid returns over the last few months and may actually be approaching a breakup point.

Discovery Silver Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Discovery Silver Corp are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Discovery Silver displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Majestic and Discovery Silver

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

The idea behind First Majestic Silver and Discovery Silver 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.