Correlation Between First Majestic and Defense Metals
Can any of the company-specific risk be diversified away by investing in both First Majestic and Defense Metals 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 First Majestic and Defense Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Majestic Silver and Defense Metals Corp, you can compare the effects of market volatilities on First Majestic and Defense Metals 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 First Majestic with a short position of Defense Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Majestic and Defense Metals.
Diversification Opportunities for First Majestic and Defense Metals
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Defense is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Defense Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defense Metals Corp and First Majestic 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 First Majestic Silver are associated (or correlated) with Defense Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defense Metals Corp has no effect on the direction of First Majestic i.e., First Majestic and Defense Metals go up and down completely randomly.
Pair Corralation between First Majestic and Defense Metals
Assuming the 90 days horizon First Majestic is expected to generate 1.27 times less return on investment than Defense Metals. But when comparing it to its historical volatility, First Majestic Silver is 1.86 times less risky than Defense Metals. It trades about 0.01 of its potential returns per unit of risk. Defense Metals Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 20.00 in Defense Metals Corp on September 25, 2024 and sell it today you would lose (4.00) from holding Defense Metals Corp or give up 20.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Majestic Silver vs. Defense Metals Corp
Performance |
| Timeline |
| First Majestic Silver |
| Defense Metals Corp |
First Majestic and Defense Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Majestic and Defense Metals
The main advantage of trading using opposite First Majestic and Defense Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Majestic position performs unexpectedly, Defense Metals 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 Defense Metals will offset losses from the drop in Defense Metals' long position.| First Majestic vs. Ivanhoe Energy | First Majestic vs. Orezone Gold Corp | First Majestic vs. Faraday Copper Corp | First Majestic vs. Infinico Metals Corp |
| Defense Metals vs. Ucore Rare Metals | Defense Metals vs. Canada Rare Earth | Defense Metals vs. Stillwater Critical Minerals |
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.
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