Correlation Between Nature Wood and First Majestic

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

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

Diversification Opportunities for Nature Wood and First Majestic

0.2

Correlation Coefficient

Nature Wood  First Majestic

Modest diversification

The 3 months correlation between Nature and First is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Nature Wood Group 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 Nature Wood 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 Nature Wood Group 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 Nature Wood i.e., Nature Wood and First Majestic go up and down completely randomly.

Pair Corralation between Nature Wood and First Majestic

Given the investment horizon of 90 days Nature Wood is expected to generate 1.49 times less return on investment than First Majestic. In addition to that, Nature Wood is 1.39 times more volatile than First Majestic Silver. It trades about 0.06 of its total potential returns per unit of risk. First Majestic Silver is currently generating about 0.13 per unit of volatility. If you would invest  538.00  in First Majestic Silver on December 28, 2024 and sell it today you would earn a total of  159.00  from holding First Majestic Silver or generate 29.55% return on investment over 90 days.

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

Nature Wood Group  vs.  First Majestic Silver

Nature Wood Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nature Wood Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady technical and fundamental indicators, Nature Wood disclosed solid returns over the last few months and may actually be approaching a breakup point.

First Majestic Silver

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Majestic Silver are ranked lower than 10 (%) 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.

Pair Trading with Nature Wood and First Majestic

The main advantage of trading using opposite Nature Wood and First Majestic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nature Wood 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 Nature Wood Group 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.