Correlation Between First Majestic and Tristar Gold

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

Diversification Opportunities for First Majestic and Tristar Gold

-0.45

Correlation Coefficient

First Majestic  Tristar Gold

Very good diversification

The 3 months correlation between First and Tristar is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Tristar Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tristar Gold 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 Tristar Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tristar Gold has no effect on the direction of First Majestic i.e., First Majestic and Tristar Gold go up and down completely randomly.

Pair Corralation between First Majestic and Tristar Gold

Assuming the 90 days horizon First Majestic Silver is expected to under-perform the Tristar Gold. But the stock apears to be less risky and, when comparing its historical volatility, First Majestic Silver is 1.69 times less risky than Tristar Gold. The stock trades about -0.05 of its potential returns per unit of risk. The Tristar Gold is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Tristar Gold on December 2, 2024 and sell it today you would earn a total of  4.00  from holding Tristar Gold or generate 28.57% 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.  Tristar Gold

First Majestic Silver

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Majestic Silver has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Tristar Gold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tristar Gold are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Tristar Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Majestic and Tristar Gold

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

The idea behind First Majestic Silver and Tristar Gold 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.