Correlation Between First Majestic and Northern Dynasty
Can any of the company-specific risk be diversified away by investing in both First Majestic and Northern Dynasty 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 Northern Dynasty 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 Northern Dynasty Minerals, you can compare the effects of market volatilities on First Majestic and Northern Dynasty 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 Northern Dynasty. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Majestic and Northern Dynasty.
Diversification Opportunities for First Majestic and Northern Dynasty
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Northern is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Northern Dynasty Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Dynasty Minerals 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 Northern Dynasty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Dynasty Minerals has no effect on the direction of First Majestic i.e., First Majestic and Northern Dynasty go up and down completely randomly.
Pair Corralation between First Majestic and Northern Dynasty
Assuming the 90 days horizon First Majestic is expected to generate 1.28 times less return on investment than Northern Dynasty. But when comparing it to its historical volatility, First Majestic Silver is 1.2 times less risky than Northern Dynasty. It trades about 0.14 of its potential returns per unit of risk. Northern Dynasty Minerals is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 44.00 in Northern Dynasty Minerals on September 5, 2024 and sell it today you would earn a total of 20.00 from holding Northern Dynasty Minerals or generate 45.45% 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. Northern Dynasty Minerals
Performance |
| Timeline |
| First Majestic Silver |
| Northern Dynasty Minerals |
First Majestic and Northern Dynasty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Majestic and Northern Dynasty
The main advantage of trading using opposite First Majestic and Northern Dynasty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Majestic position performs unexpectedly, Northern Dynasty 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 Northern Dynasty will offset losses from the drop in Northern Dynasty's long position.| First Majestic vs. Reliq Health Technologies | First Majestic vs. NeuPath Health | First Majestic vs. Bausch Health Companies | First Majestic vs. TUT Fitness Group |
| Northern Dynasty vs. First Majestic Silver | Northern Dynasty vs. Ivanhoe Energy | Northern Dynasty vs. Orezone Gold Corp | Northern Dynasty vs. Faraday Copper Corp |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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