Correlation Between First Majestic and Honey Badger

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

Diversification Opportunities for First Majestic and Honey Badger

0.76

Correlation Coefficient

First Majestic  Honey Badger

Poor diversification

The 3 months correlation between First and Honey is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Honey Badger Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honey Badger Silver 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 Honey Badger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honey Badger Silver has no effect on the direction of First Majestic i.e., First Majestic and Honey Badger go up and down completely randomly.

Pair Corralation between First Majestic and Honey Badger

Assuming the 90 days horizon First Majestic Silver is expected to under-perform the Honey Badger. But the stock apears to be less risky and, when comparing its historical volatility, First Majestic Silver is 2.56 times less risky than Honey Badger. The stock trades about -0.14 of its potential returns per unit of risk. The Honey Badger Silver is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Honey Badger Silver on September 23, 2024 and sell it today you would lose (1.00) from holding Honey Badger Silver or give up 8.33% of portfolio value over 90 days.

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

First Majestic Silver  vs.  Honey Badger Silver

First Majestic Silver

Risk-Adjusted Performance

0 of 100

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.

Honey Badger Silver

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Honey Badger Silver are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Honey Badger showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Majestic and Honey Badger

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

The idea behind First Majestic Silver and Honey Badger Silver 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.