Correlation Between North American and First Majestic
Can any of the company-specific risk be diversified away by investing in both North American and First Majestic 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 North American and First Majestic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Financial and First Majestic Silver, you can compare the effects of market volatilities on North American and First Majestic 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 North American with a short position of First Majestic. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and First Majestic.
Diversification Opportunities for North American and First Majestic
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between North and First is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding North American Financial and First Majestic Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Majestic Silver and North American 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 North American Financial are associated (or correlated) with First Majestic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Majestic Silver has no effect on the direction of North American i.e., North American and First Majestic go up and down completely randomly.
Pair Corralation between North American and First Majestic
Assuming the 90 days trading horizon North American Financial is expected to generate 0.67 times more return on investment than First Majestic. However, North American Financial is 1.5 times less risky than First Majestic. It trades about 0.05 of its potential returns per unit of risk. First Majestic Silver is currently generating about 0.01 per unit of risk. If you would invest 460.00 in North American Financial on November 1, 2024 and sell it today you would earn a total of 283.00 from holding North American Financial or generate 61.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Financial vs. First Majestic Silver
Performance |
| Timeline |
| North American Financial |
| First Majestic Silver |
North American and First Majestic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and First Majestic
The main advantage of trading using opposite North American and First Majestic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American position performs unexpectedly, First Majestic 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 First Majestic will offset losses from the drop in First Majestic's long position.| North American vs. Dividend Growth Split | North American vs. Dividend 15 Split | North American vs. Financial 15 Split | North American vs. Dividend 15 Split |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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