Correlation Between Silver Mines and First Majestic

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

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

Diversification Opportunities for Silver Mines and First Majestic

0.8

Correlation Coefficient

Silver Mines  First Majestic

Very poor diversification

The 3 months correlation between Silver and First is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Silver Mines Limited 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 Silver Mines 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 Silver Mines Limited 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 Silver Mines i.e., Silver Mines and First Majestic go up and down completely randomly.

Pair Corralation between Silver Mines and First Majestic

Assuming the 90 days horizon Silver Mines Limited is expected to under-perform the First Majestic. In addition to that, Silver Mines is 1.85 times more volatile than First Majestic Silver. It trades about -0.1 of its total potential returns per unit of risk. First Majestic Silver is currently generating about -0.09 per unit of volatility. If you would invest  712.00  in First Majestic Silver on October 23, 2024 and sell it today you would lose (151.00) from holding First Majestic Silver or give up 21.21% of portfolio value over 90 days.

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

Silver Mines Limited  vs.  First Majestic Silver

Silver Mines Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Silver Mines Limited 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.

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.

Pair Trading with Silver Mines and First Majestic

The main advantage of trading using opposite Silver Mines and First Majestic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silver Mines 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 Silver Mines Limited 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.