Correlation Between First Majestic and Gold Fields

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

Diversification Opportunities for First Majestic and Gold Fields

0.87

Correlation Coefficient

First Majestic  Gold Fields

Very poor diversification

The 3 months correlation between First and Gold is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Gold Fields Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Fields 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 Gold Fields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Fields has no effect on the direction of First Majestic i.e., First Majestic and Gold Fields go up and down completely randomly.

Pair Corralation between First Majestic and Gold Fields

Allowing for the 90-day total investment horizon First Majestic Silver is expected to generate 1.45 times more return on investment than Gold Fields. However, First Majestic is 1.45 times more volatile than Gold Fields Ltd. It trades about 0.08 of its potential returns per unit of risk. Gold Fields Ltd is currently generating about 0.05 per unit of risk. If you would invest  528.00  in First Majestic Silver on September 2, 2024 and sell it today you would earn a total of  83.00  from holding First Majestic Silver or generate 15.72% return on investment over 90 days.

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

First Majestic Silver  vs.  Gold Fields Ltd

First Majestic Silver

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Majestic Silver are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, First Majestic reported solid returns over the last few months and may actually be approaching a breakup point.

Gold Fields

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Fields Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Gold Fields may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with First Majestic and Gold Fields

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

The idea behind First Majestic Silver and Gold Fields Ltd 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.