Correlation Between Colonial Coal and First Majestic

Can any of the company-specific risk be diversified away by investing in both Colonial Coal and First Majestic 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 Colonial Coal and First Majestic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Colonial Coal International and First Majestic Silver, you can compare the effects of market volatilities on Colonial Coal and First Majestic 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 Colonial Coal with a short position of First Majestic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colonial Coal and First Majestic.

Diversification Opportunities for Colonial Coal and First Majestic

0.11

Correlation Coefficient

Colonial Coal  First Majestic

Average diversification

The 3 months correlation between Colonial and First is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Colonial Coal International and First Majestic Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Majestic Silver and Colonial Coal 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 Colonial Coal International are associated (or correlated) with First Majestic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Majestic Silver has no effect on the direction of Colonial Coal i.e., Colonial Coal and First Majestic go up and down completely randomly.

Pair Corralation between Colonial Coal and First Majestic

Assuming the 90 days horizon Colonial Coal International is expected to generate 1.17 times more return on investment than First Majestic. However, Colonial Coal is 1.17 times more volatile than First Majestic Silver. It trades about 0.04 of its potential returns per unit of risk. First Majestic Silver is currently generating about -0.01 per unit of risk. If you would invest  128.00  in Colonial Coal International on September 25, 2024 and sell it today you would earn a total of  60.00  from holding Colonial Coal International or generate 46.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Colonial Coal International  vs.  First Majestic Silver

Colonial Coal Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Colonial Coal International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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.

Pair Trading with Colonial Coal and First Majestic

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

The idea behind Colonial Coal International and First Majestic 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.