Correlation Between First Majestic and Lithium Americas
Can any of the company-specific risk be diversified away by investing in both First Majestic and Lithium Americas 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 Lithium Americas 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 Lithium Americas Corp, you can compare the effects of market volatilities on First Majestic and Lithium Americas 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 Lithium Americas. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Majestic and Lithium Americas.
Diversification Opportunities for First Majestic and Lithium Americas
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Lithium is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Lithium Americas Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Americas 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 Lithium Americas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Americas Corp has no effect on the direction of First Majestic i.e., First Majestic and Lithium Americas go up and down completely randomly.
Pair Corralation between First Majestic and Lithium Americas
Assuming the 90 days horizon First Majestic Silver is expected to generate 0.7 times more return on investment than Lithium Americas. However, First Majestic Silver is 1.42 times less risky than Lithium Americas. It trades about 0.03 of its potential returns per unit of risk. Lithium Americas Corp is currently generating about -0.01 per unit of risk. If you would invest 803.00 in First Majestic Silver on August 25, 2024 and sell it today you would earn a total of 78.00 from holding First Majestic Silver or generate 9.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Majestic Silver vs. Lithium Americas Corp
Performance |
| Timeline |
| First Majestic Silver |
| Lithium Americas Corp |
First Majestic and Lithium Americas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Majestic and Lithium Americas
The main advantage of trading using opposite First Majestic and Lithium Americas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Majestic position performs unexpectedly, Lithium Americas 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 Lithium Americas will offset losses from the drop in Lithium Americas' long position.| First Majestic vs. Canadian General Investments | First Majestic vs. 2028 Investment Grade | First Majestic vs. Brookfield Investments | First Majestic vs. Upstart Investments |
| Lithium Americas vs. American Lithium Corp | Lithium Americas vs. Ballard Power Systems | Lithium Americas vs. Lightspeed Commerce | Lithium Americas vs. WELL Health Technologies |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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