Correlation Between First Majestic and Rio2
Can any of the company-specific risk be diversified away by investing in both First Majestic and Rio2 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 Rio2 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 Rio2, you can compare the effects of market volatilities on First Majestic and Rio2 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 Rio2. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Majestic and Rio2.
Diversification Opportunities for First Majestic and Rio2
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Rio2 is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Rio2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio2 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 Rio2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio2 has no effect on the direction of First Majestic i.e., First Majestic and Rio2 go up and down completely randomly.
Pair Corralation between First Majestic and Rio2
Assuming the 90 days horizon First Majestic Silver is expected to under-perform the Rio2. But the stock apears to be less risky and, when comparing its historical volatility, First Majestic Silver is 1.44 times less risky than Rio2. The stock trades about 0.0 of its potential returns per unit of risk. The Rio2 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 17.00 in Rio2 on August 26, 2024 and sell it today you would earn a total of 51.00 from holding Rio2 or generate 300.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Majestic Silver vs. Rio2
Performance |
| Timeline |
| First Majestic Silver |
| Rio2 |
First Majestic and Rio2 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Majestic and Rio2
The main advantage of trading using opposite First Majestic and Rio2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Majestic position performs unexpectedly, Rio2 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 Rio2 will offset losses from the drop in Rio2's long position.| First Majestic vs. Canadian General Investments | First Majestic vs. 2028 Investment Grade | First Majestic vs. Brookfield Investments | First Majestic vs. Upstart Investments |
| Rio2 vs. Minera Alamos | Rio2 vs. Integra Resources Corp | Rio2 vs. Liberty Gold Corp | Rio2 vs. Silver One Resources |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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