Correlation Between First Majestic and Stillwater Critical

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

Diversification Opportunities for First Majestic and Stillwater Critical

0.82

Correlation Coefficient

First Majestic  Stillwater Critical

Very poor diversification

The 3 months correlation between First and Stillwater is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Stillwater Critical Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stillwater Critical 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 Stillwater Critical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stillwater Critical has no effect on the direction of First Majestic i.e., First Majestic and Stillwater Critical go up and down completely randomly.

Pair Corralation between First Majestic and Stillwater Critical

Assuming the 90 days horizon First Majestic Silver is expected to under-perform the Stillwater Critical. But the stock apears to be less risky and, when comparing its historical volatility, First Majestic Silver is 2.4 times less risky than Stillwater Critical. The stock trades about -0.13 of its potential returns per unit of risk. The Stillwater Critical Minerals is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Stillwater Critical Minerals on September 5, 2024 and sell it today you would lose (2.00) from holding Stillwater Critical Minerals or give up 12.5% 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.  Stillwater Critical Minerals

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.

Stillwater Critical

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with First Majestic and Stillwater Critical

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

The idea behind First Majestic Silver and Stillwater Critical 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.