Correlation Between NorAm Drilling and First Majestic

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

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

Diversification Opportunities for NorAm Drilling and First Majestic

0.4

Correlation Coefficient

NorAm Drilling  First Majestic

Very weak diversification

The 3 months correlation between NorAm and First is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS 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 NorAm Drilling 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 NorAm Drilling AS 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 NorAm Drilling i.e., NorAm Drilling and First Majestic go up and down completely randomly.

Pair Corralation between NorAm Drilling and First Majestic

Assuming the 90 days horizon NorAm Drilling is expected to generate 3.04 times less return on investment than First Majestic. In addition to that, NorAm Drilling is 1.22 times more volatile than First Majestic Silver. It trades about 0.01 of its total potential returns per unit of risk. First Majestic Silver is currently generating about 0.03 per unit of volatility. If you would invest  502.00  in First Majestic Silver on October 10, 2024 and sell it today you would earn a total of  81.00  from holding First Majestic Silver or generate 16.14% return on investment over 90 days.

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

NorAm Drilling AS  vs.  First Majestic Silver

NorAm Drilling AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NorAm Drilling AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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

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.

Pair Trading with NorAm Drilling and First Majestic

The main advantage of trading using opposite NorAm Drilling and First Majestic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling 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 NorAm Drilling AS 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.