Correlation Between First Majestic and Fredonia Mining

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

Diversification Opportunities for First Majestic and Fredonia Mining

0.63

Correlation Coefficient

First Majestic  Fredonia Mining

Poor diversification

The 3 months correlation between First and Fredonia is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Fredonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fredonia Mining 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 Fredonia Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fredonia Mining has no effect on the direction of First Majestic i.e., First Majestic and Fredonia Mining go up and down completely randomly.

Pair Corralation between First Majestic and Fredonia Mining

Assuming the 90 days horizon First Majestic Silver is expected to generate 0.42 times more return on investment than Fredonia Mining. However, First Majestic Silver is 2.38 times less risky than Fredonia Mining. It trades about 0.03 of its potential returns per unit of risk. Fredonia Mining is currently generating about -0.18 per unit of risk. If you would invest  805.00  in First Majestic Silver on October 25, 2024 and sell it today you would earn a total of  5.00  from holding First Majestic Silver or generate 0.62% return on investment over 90 days.

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

First Majestic Silver  vs.  Fredonia Mining

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Fredonia Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fredonia Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with First Majestic and Fredonia Mining

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

The idea behind First Majestic Silver and Fredonia Mining 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.