Correlation Between First Majestic and Dolly Varden

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

Diversification Opportunities for First Majestic and Dolly Varden

0.86

Correlation Coefficient

First Majestic  Dolly Varden

Very poor diversification

The 3 months correlation between First and Dolly is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Dolly Varden Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dolly Varden 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 Dolly Varden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dolly Varden Silver has no effect on the direction of First Majestic i.e., First Majestic and Dolly Varden go up and down completely randomly.

Pair Corralation between First Majestic and Dolly Varden

Assuming the 90 days horizon First Majestic is expected to generate 16.37 times less return on investment than Dolly Varden. But when comparing it to its historical volatility, First Majestic Silver is 1.55 times less risky than Dolly Varden. It trades about 0.0 of its potential returns per unit of risk. Dolly Varden Silver is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  68.00  in Dolly Varden Silver on October 26, 2024 and sell it today you would lose (7.00) from holding Dolly Varden Silver or give up 10.29% of portfolio value over 90 days.

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

First Majestic Silver  vs.  Dolly Varden 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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Dolly Varden Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dolly Varden Silver has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with First Majestic and Dolly Varden

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

The idea behind First Majestic Silver and Dolly Varden 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.