Correlation Between First Majestic and K92 Mining

Can any of the company-specific risk be diversified away by investing in both First Majestic and K92 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 K92 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 K92 Mining, you can compare the effects of market volatilities on First Majestic and K92 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 K92 Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Majestic and K92 Mining.

Diversification Opportunities for First Majestic and K92 Mining

0.86

Correlation Coefficient

First Majestic  K92 Mining

Very poor diversification

The 3 months correlation between First and K92 is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and K92 Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K92 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 K92 Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K92 Mining has no effect on the direction of First Majestic i.e., First Majestic and K92 Mining go up and down completely randomly.

Pair Corralation between First Majestic and K92 Mining

Assuming the 90 days horizon First Majestic Silver is expected to under-perform the K92 Mining. In addition to that, First Majestic is 1.03 times more volatile than K92 Mining. It trades about -0.35 of its total potential returns per unit of risk. K92 Mining is currently generating about -0.06 per unit of volatility. If you would invest  940.00  in K92 Mining on August 31, 2024 and sell it today you would lose (39.00) from holding K92 Mining or give up 4.15% of portfolio value over 90 days.

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

First Majestic Silver  vs.  K92 Mining

First Majestic Silver

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Majestic Silver are ranked lower than 7 (%) 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.

K92 Mining

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in K92 Mining are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, K92 Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Majestic and K92 Mining

The main advantage of trading using opposite First Majestic and K92 Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Majestic position performs unexpectedly, K92 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 K92 Mining will offset losses from the drop in K92 Mining's long position.

The idea behind First Majestic Silver and K92 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.