Correlation Between O3 Mining and First Majestic

Can any of the company-specific risk be diversified away by investing in both O3 Mining 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 O3 Mining and First Majestic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between O3 Mining and First Majestic Silver, you can compare the effects of market volatilities on O3 Mining 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 O3 Mining with a short position of First Majestic. Check out your portfolio center. Please also check ongoing floating volatility patterns of O3 Mining and First Majestic.

Diversification Opportunities for O3 Mining and First Majestic

0.73

Correlation Coefficient

O3 Mining  First Majestic

Poor diversification

The 3 months correlation between OIII and First is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding O3 Mining 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 O3 Mining 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 O3 Mining 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 O3 Mining i.e., O3 Mining and First Majestic go up and down completely randomly.

Pair Corralation between O3 Mining and First Majestic

Assuming the 90 days trading horizon O3 Mining is expected to generate 5.79 times less return on investment than First Majestic. But when comparing it to its historical volatility, O3 Mining is 1.37 times less risky than First Majestic. It trades about 0.03 of its potential returns per unit of risk. First Majestic Silver is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  713.00  in First Majestic Silver on September 4, 2024 and sell it today you would earn a total of  179.00  from holding First Majestic Silver or generate 25.11% return on investment over 90 days.

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

O3 Mining  vs.  First Majestic Silver

O3 Mining

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in O3 Mining are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, O3 Mining is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

First Majestic Silver

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Majestic Silver are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, First Majestic displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with O3 Mining and First Majestic

The main advantage of trading using opposite O3 Mining and First Majestic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if O3 Mining 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 O3 Mining 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.