Correlation Between First Majestic and MAG Silver

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

Diversification Opportunities for First Majestic and MAG Silver

0.91

Correlation Coefficient

First Majestic  MAG Silver

Almost no diversification

The 3 months correlation between First and MAG is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and MAG Silver Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAG Silver Corp 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 MAG Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAG Silver Corp has no effect on the direction of First Majestic i.e., First Majestic and MAG Silver go up and down completely randomly.

Pair Corralation between First Majestic and MAG Silver

Assuming the 90 days horizon First Majestic Silver is expected to under-perform the MAG Silver. In addition to that, First Majestic is 1.46 times more volatile than MAG Silver Corp. It trades about -0.2 of its total potential returns per unit of risk. MAG Silver Corp is currently generating about -0.04 per unit of volatility. If you would invest  1,416  in MAG Silver Corp on October 8, 2024 and sell it today you would lose (30.00) from holding MAG Silver Corp or give up 2.12% of portfolio value over 90 days.

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

First Majestic Silver  vs.  MAG Silver Corp

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 basic indicators, First Majestic is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

MAG Silver Corp

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with First Majestic and MAG Silver

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

The idea behind First Majestic Silver and MAG Silver Corp 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.