Correlation Between First Majestic and Fortuna Silver

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

Diversification Opportunities for First Majestic and Fortuna Silver

0.31

Correlation Coefficient

First Majestic  Fortuna Silver

Weak diversification

The 3 months correlation between First and Fortuna is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Fortuna Silver Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortuna Silver Mines 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 Fortuna Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortuna Silver Mines has no effect on the direction of First Majestic i.e., First Majestic and Fortuna Silver go up and down completely randomly.

Pair Corralation between First Majestic and Fortuna Silver

Assuming the 90 days horizon First Majestic Silver is expected to under-perform the Fortuna Silver. In addition to that, First Majestic is 1.18 times more volatile than Fortuna Silver Mines. It trades about -0.11 of its total potential returns per unit of risk. Fortuna Silver Mines is currently generating about 0.26 per unit of volatility. If you would invest  624.00  in Fortuna Silver Mines on November 20, 2024 and sell it today you would earn a total of  107.00  from holding Fortuna Silver Mines or generate 17.15% return on investment over 90 days.

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

First Majestic Silver  vs.  Fortuna Silver Mines

First Majestic Silver

Risk-Adjusted Performance

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

Fortuna Silver Mines

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fortuna Silver Mines are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Fortuna Silver may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with First Majestic and Fortuna Silver

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

The idea behind First Majestic Silver and Fortuna Silver Mines 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.