Correlation Between First Majestic and Zonte Metals

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

Diversification Opportunities for First Majestic and Zonte Metals

-0.52

Correlation Coefficient

First Majestic  Zonte Metals

Excellent diversification

The 3 months correlation between First and Zonte is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Zonte Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zonte Metals 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 Zonte Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zonte Metals has no effect on the direction of First Majestic i.e., First Majestic and Zonte Metals go up and down completely randomly.

Pair Corralation between First Majestic and Zonte Metals

Assuming the 90 days horizon First Majestic Silver is expected to under-perform the Zonte Metals. But the stock apears to be less risky and, when comparing its historical volatility, First Majestic Silver is 1.99 times less risky than Zonte Metals. The stock trades about -0.19 of its potential returns per unit of risk. The Zonte Metals is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  8.00  in Zonte Metals on October 4, 2024 and sell it today you would earn a total of  1.00  from holding Zonte Metals or generate 12.5% 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.  Zonte Metals

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 current stock price disarray, may contribute to short-term losses for the investors.

Zonte Metals

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with First Majestic and Zonte Metals

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

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