Correlation Between First Majestic and First Trust

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

Diversification Opportunities for First Majestic and First Trust

-0.48

Correlation Coefficient

First Majestic  First Trust

Very good diversification

The 3 months correlation between First and First is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Exchange has no effect on the direction of First Majestic i.e., First Majestic and First Trust go up and down completely randomly.

Pair Corralation between First Majestic and First Trust

Allowing for the 90-day total investment horizon First Majestic Silver is expected to generate 27.43 times more return on investment than First Trust. However, First Majestic is 27.43 times more volatile than First Trust Exchange Traded. It trades about 0.01 of its potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.1 per unit of risk. If you would invest  609.00  in First Majestic Silver on September 17, 2024 and sell it today you would lose (6.00) from holding First Majestic Silver or give up 0.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

First Majestic Silver  vs.  First Trust Exchange Traded

First Majestic Silver

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Majestic Silver are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, First Majestic is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

First Trust Exchange

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange Traded are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, First Trust is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with First Majestic and First Trust

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

The idea behind First Majestic Silver and First Trust Exchange Traded 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.