Correlation Between First Majestic and Teck Resources

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

Diversification Opportunities for First Majestic and Teck Resources

0.16

Correlation Coefficient

First Majestic  Teck Resources

Average diversification

The 3 months correlation between First and Teck is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Teck Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teck Resources 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 Teck Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teck Resources has no effect on the direction of First Majestic i.e., First Majestic and Teck Resources go up and down completely randomly.

Pair Corralation between First Majestic and Teck Resources

Assuming the 90 days horizon First Majestic Silver is expected to generate 1.93 times more return on investment than Teck Resources. However, First Majestic is 1.93 times more volatile than Teck Resources Limited. It trades about 0.12 of its potential returns per unit of risk. Teck Resources Limited is currently generating about 0.03 per unit of risk. If you would invest  790.00  in First Majestic Silver on December 21, 2024 and sell it today you would earn a total of  219.00  from holding First Majestic Silver or generate 27.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

First Majestic Silver  vs.  Teck Resources Limited

First Majestic Silver

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Majestic Silver are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, First Majestic displayed solid returns over the last few months and may actually be approaching a breakup point.

Teck Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Teck Resources Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Teck Resources is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Majestic and Teck Resources

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

The idea behind First Majestic Silver and Teck Resources Limited 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.