Correlation Between First Majestic and Wheaton Precious
Can any of the company-specific risk be diversified away by investing in both First Majestic and Wheaton Precious 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 Wheaton Precious 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 Wheaton Precious Metals, you can compare the effects of market volatilities on First Majestic and Wheaton Precious 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 Wheaton Precious. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Majestic and Wheaton Precious.
Diversification Opportunities for First Majestic and Wheaton Precious
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Wheaton is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Wheaton Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wheaton Precious Metals 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 Wheaton Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wheaton Precious Metals has no effect on the direction of First Majestic i.e., First Majestic and Wheaton Precious go up and down completely randomly.
Pair Corralation between First Majestic and Wheaton Precious
Allowing for the 90-day total investment horizon First Majestic Silver is expected to under-perform the Wheaton Precious. In addition to that, First Majestic is 1.17 times more volatile than Wheaton Precious Metals. It trades about -0.36 of its total potential returns per unit of risk. Wheaton Precious Metals is currently generating about -0.15 per unit of volatility. If you would invest 6,629 in Wheaton Precious Metals on August 28, 2024 and sell it today you would lose (535.00) from holding Wheaton Precious Metals or give up 8.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Majestic Silver vs. Wheaton Precious Metals
Performance |
| Timeline |
| First Majestic Silver |
| Wheaton Precious Metals |
First Majestic and Wheaton Precious Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Majestic and Wheaton Precious
The main advantage of trading using opposite First Majestic and Wheaton Precious positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Majestic position performs unexpectedly, Wheaton Precious 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 Wheaton Precious will offset losses from the drop in Wheaton Precious' long position.The idea behind First Majestic Silver and Wheaton Precious Metals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Wheaton Precious vs. Royal Gold | Wheaton Precious vs. Agnico Eagle Mines | Wheaton Precious vs. Sandstorm Gold Ltd | Wheaton Precious vs. Osisko Gold Ro |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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