Correlation Between First Majestic and Labrador Iron
Can any of the company-specific risk be diversified away by investing in both First Majestic and Labrador Iron 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 Labrador Iron 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 Labrador Iron Ore, you can compare the effects of market volatilities on First Majestic and Labrador Iron 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 Labrador Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Majestic and Labrador Iron.
Diversification Opportunities for First Majestic and Labrador Iron
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Labrador is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Labrador Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Labrador Iron Ore 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 Labrador Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Labrador Iron Ore has no effect on the direction of First Majestic i.e., First Majestic and Labrador Iron go up and down completely randomly.
Pair Corralation between First Majestic and Labrador Iron
Assuming the 90 days horizon First Majestic Silver is expected to generate 2.55 times more return on investment than Labrador Iron. However, First Majestic is 2.55 times more volatile than Labrador Iron Ore. It trades about 0.03 of its potential returns per unit of risk. Labrador Iron Ore is currently generating about 0.02 per unit of risk. If you would invest 779.00 in First Majestic Silver on August 31, 2024 and sell it today you would earn a total of 89.00 from holding First Majestic Silver or generate 11.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Majestic Silver vs. Labrador Iron Ore
Performance |
| Timeline |
| First Majestic Silver |
| Labrador Iron Ore |
First Majestic and Labrador Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Majestic and Labrador Iron
The main advantage of trading using opposite First Majestic and Labrador Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Majestic position performs unexpectedly, Labrador Iron 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 Labrador Iron will offset losses from the drop in Labrador Iron's long position.| First Majestic vs. Nova Leap Health | First Majestic vs. Leveljump Healthcare Corp | First Majestic vs. Perseus Mining | First Majestic vs. CVS HEALTH CDR |
| Labrador Iron vs. Solar Alliance Energy | Labrador Iron vs. Global X Active | Labrador Iron vs. Financial 15 Split | Labrador Iron vs. Rubicon Organics |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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