Correlation Between First Majestic and Starcore International

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

Diversification Opportunities for First Majestic and Starcore International

0.62

Correlation Coefficient

First Majestic  Starcore International

Poor diversification

The 3 months correlation between First and Starcore is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Starcore International Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starcore International 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 Starcore International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starcore International has no effect on the direction of First Majestic i.e., First Majestic and Starcore International go up and down completely randomly.

Pair Corralation between First Majestic and Starcore International

Assuming the 90 days horizon First Majestic is expected to generate 1.36 times less return on investment than Starcore International. But when comparing it to its historical volatility, First Majestic Silver is 2.01 times less risky than Starcore International. It trades about 0.15 of its potential returns per unit of risk. Starcore International Mines is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Starcore International Mines on September 8, 2024 and sell it today you would earn a total of  4.00  from holding Starcore International Mines or generate 36.36% return on investment over 90 days.

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

First Majestic Silver  vs.  Starcore International Mines

First Majestic Silver

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Majestic Silver are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, First Majestic displayed solid returns over the last few months and may actually be approaching a breakup point.

Starcore International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Starcore International Mines are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Starcore International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Majestic and Starcore International

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

The idea behind First Majestic Silver and Starcore International 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.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.