Correlation Between Pan American and First Majestic
Can any of the company-specific risk be diversified away by investing in both Pan 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 Pan 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 Pan American Silver and First Majestic Silver, you can compare the effects of market volatilities on Pan 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 Pan American with a short position of First Majestic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan American and First Majestic.
Diversification Opportunities for Pan American and First Majestic
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pan and First is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Pan American Silver 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 Pan 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 Pan American Silver 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 Pan American i.e., Pan American and First Majestic go up and down completely randomly.
Pair Corralation between Pan American and First Majestic
Assuming the 90 days horizon Pan American Silver is expected to generate 0.84 times more return on investment than First Majestic. However, Pan American Silver is 1.19 times less risky than First Majestic. It trades about -0.11 of its potential returns per unit of risk. First Majestic Silver is currently generating about -0.12 per unit of risk. If you would invest 2,181 in Pan American Silver on September 23, 2024 and sell it today you would lose (179.00) from holding Pan American Silver or give up 8.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pan American Silver vs. First Majestic Silver
Performance |
| Timeline |
| Pan American Silver |
| First Majestic Silver |
Pan American and First Majestic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pan American and First Majestic
The main advantage of trading using opposite Pan American and First Majestic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pan 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.| Pan American vs. First Majestic Silver | Pan American vs. MAG Silver Corp | Pan American vs. Silvercorp Metals | Pan American vs. Endeavour Silver Corp |
| First Majestic vs. Pan American Silver | First Majestic vs. MAG Silver Corp | First Majestic vs. Silvercorp Metals | First Majestic vs. Endeavour Silver Corp |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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