Correlation Between First Majestic and Signature Resources
Can any of the company-specific risk be diversified away by investing in both First Majestic and Signature Resources 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 Signature Resources 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 Signature Resources, you can compare the effects of market volatilities on First Majestic and Signature Resources 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 Signature Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Majestic and Signature Resources.
Diversification Opportunities for First Majestic and Signature Resources
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between First and Signature is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Signature Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Signature Resources 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 Signature Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Signature Resources has no effect on the direction of First Majestic i.e., First Majestic and Signature Resources go up and down completely randomly.
Pair Corralation between First Majestic and Signature Resources
Assuming the 90 days horizon First Majestic Silver is expected to under-perform the Signature Resources. But the stock apears to be less risky and, when comparing its historical volatility, First Majestic Silver is 2.85 times less risky than Signature Resources. The stock trades about -0.31 of its potential returns per unit of risk. The Signature Resources is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 3.50 in Signature Resources on August 29, 2024 and sell it today you would earn a total of 1.00 from holding Signature Resources or generate 28.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Majestic Silver vs. Signature Resources
Performance |
| Timeline |
| First Majestic Silver |
| Signature Resources |
First Majestic and Signature Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Majestic and Signature Resources
The main advantage of trading using opposite First Majestic and Signature Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Majestic position performs unexpectedly, Signature Resources 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 Signature Resources will offset losses from the drop in Signature Resources' long position.| First Majestic vs. 2028 Investment Grade | First Majestic vs. Western Investment | First Majestic vs. Atrium Mortgage Investment | First Majestic vs. Air Canada |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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