Correlation Between First Majestic and Mandalay Resources

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

Diversification Opportunities for First Majestic and Mandalay Resources

0.44

Correlation Coefficient

First Majestic  Mandalay Resources

Very weak diversification

The 3 months correlation between First and Mandalay is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Mandalay Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mandalay Resources 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 Mandalay Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mandalay Resources Corp has no effect on the direction of First Majestic i.e., First Majestic and Mandalay Resources go up and down completely randomly.

Pair Corralation between First Majestic and Mandalay Resources

Assuming the 90 days horizon First Majestic Silver is expected to under-perform the Mandalay Resources. In addition to that, First Majestic is 1.1 times more volatile than Mandalay Resources Corp. It trades about -0.13 of its total potential returns per unit of risk. Mandalay Resources Corp is currently generating about 0.31 per unit of volatility. If you would invest  333.00  in Mandalay Resources Corp on September 5, 2024 and sell it today you would earn a total of  66.00  from holding Mandalay Resources Corp or generate 19.82% 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.  Mandalay Resources Corp

First Majestic Silver

Risk-Adjusted Performance

10 of 100

Good

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.

Mandalay Resources Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mandalay Resources Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Mandalay Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Majestic and Mandalay Resources

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

The idea behind First Majestic Silver and Mandalay Resources 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.