Correlation Between First Majestic and Pacific Bay

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

Diversification Opportunities for First Majestic and Pacific Bay

-0.59

Correlation Coefficient

First Majestic  Pacific Bay

Excellent diversification

The 3 months correlation between First and Pacific is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Pacific Bay Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Bay Minerals 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 Pacific Bay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Bay Minerals has no effect on the direction of First Majestic i.e., First Majestic and Pacific Bay go up and down completely randomly.

Pair Corralation between First Majestic and Pacific Bay

Assuming the 90 days horizon First Majestic is expected to generate 23.34 times less return on investment than Pacific Bay. But when comparing it to its historical volatility, First Majestic Silver is 3.8 times less risky than Pacific Bay. It trades about 0.01 of its potential returns per unit of risk. Pacific Bay Minerals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Pacific Bay Minerals on October 9, 2024 and sell it today you would earn a total of  1.00  from holding Pacific Bay Minerals or generate 25.0% return on investment over 90 days.

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

First Majestic Silver  vs.  Pacific Bay Minerals

First Majestic Silver

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Majestic Silver are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, First Majestic is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pacific Bay Minerals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Bay Minerals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Pacific Bay showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Majestic and Pacific Bay

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

The idea behind First Majestic Silver and Pacific Bay Minerals 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.