Correlation Between SEALED AIR and First Majestic

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

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

Diversification Opportunities for SEALED AIR and First Majestic

0.15

Correlation Coefficient

SEALED AIR  First Majestic

Average diversification

The 3 months correlation between SEALED and First is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding SEALED AIR 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 SEALED AIR 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 SEALED AIR 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 SEALED AIR i.e., SEALED AIR and First Majestic go up and down completely randomly.

Pair Corralation between SEALED AIR and First Majestic

Assuming the 90 days trading horizon SEALED AIR is expected to generate 1.23 times less return on investment than First Majestic. But when comparing it to its historical volatility, SEALED AIR is 2.52 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 0.02 of returns per unit of risk over similar time horizon. If you would invest  588.00  in First Majestic Silver on October 12, 2024 and sell it today you would lose (5.00) from holding First Majestic Silver or give up 0.85% of portfolio value over 90 days.

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

SEALED AIR   vs.  First Majestic Silver

SEALED AIR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SEALED AIR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SEALED AIR is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SEALED AIR and First Majestic

The main advantage of trading using opposite SEALED AIR and First Majestic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SEALED AIR 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 SEALED AIR 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.