Correlation Between Labrador Iron and First Majestic
Can any of the company-specific risk be diversified away by investing in both Labrador Iron 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 Labrador Iron and First Majestic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Labrador Iron Ore and First Majestic Silver, you can compare the effects of market volatilities on Labrador Iron 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 Labrador Iron with a short position of First Majestic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Labrador Iron and First Majestic.
Diversification Opportunities for Labrador Iron and First Majestic
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Labrador and First is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Labrador Iron Ore 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 Labrador Iron 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 Labrador Iron Ore 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 Labrador Iron i.e., Labrador Iron and First Majestic go up and down completely randomly.
Pair Corralation between Labrador Iron and First Majestic
Assuming the 90 days trading horizon Labrador Iron Ore is expected to generate 0.46 times more return on investment than First Majestic. However, Labrador Iron Ore is 2.17 times less risky than First Majestic. It trades about -0.21 of its potential returns per unit of risk. First Majestic Silver is currently generating about -0.31 per unit of risk. If you would invest 3,129 in Labrador Iron Ore on August 29, 2024 and sell it today you would lose (196.00) from holding Labrador Iron Ore or give up 6.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Labrador Iron Ore vs. First Majestic Silver
Performance |
| Timeline |
| Labrador Iron Ore |
| First Majestic Silver |
Labrador Iron and First Majestic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Labrador Iron and First Majestic
The main advantage of trading using opposite Labrador Iron and First Majestic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Labrador Iron 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.| Labrador Iron vs. Keyera Corp | Labrador Iron vs. Russel Metals | Labrador Iron vs. Freehold Royalties | Labrador Iron vs. Capital Power |
| First Majestic vs. Talon Metals Corp | First Majestic vs. Champion Gaming Group | First Majestic vs. SalesforceCom CDR | First Majestic vs. Gfl Environmental Holdings |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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