Correlation Between Arbor Metals and First Majestic

Can any of the company-specific risk be diversified away by investing in both Arbor Metals 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 Arbor Metals and First Majestic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arbor Metals Corp and First Majestic Silver, you can compare the effects of market volatilities on Arbor Metals 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 Arbor Metals with a short position of First Majestic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arbor Metals and First Majestic.

Diversification Opportunities for Arbor Metals and First Majestic

-0.33

Correlation Coefficient

Arbor Metals  First Majestic

Very good diversification

The 3 months correlation between Arbor and First is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Arbor Metals Corp 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 Arbor Metals 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 Arbor Metals Corp 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 Arbor Metals i.e., Arbor Metals and First Majestic go up and down completely randomly.

Pair Corralation between Arbor Metals and First Majestic

Assuming the 90 days horizon Arbor Metals Corp is expected to under-perform the First Majestic. But the stock apears to be less risky and, when comparing its historical volatility, Arbor Metals Corp is 1.3 times less risky than First Majestic. The stock trades about -0.17 of its potential returns per unit of risk. The First Majestic Silver is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  713.00  in First Majestic Silver on September 4, 2024 and sell it today you would earn a total of  122.00  from holding First Majestic Silver or generate 17.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Arbor Metals Corp  vs.  First Majestic Silver

Arbor Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arbor Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

First Majestic Silver

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Majestic Silver are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, First Majestic displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arbor Metals and First Majestic

The main advantage of trading using opposite Arbor Metals and First Majestic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arbor Metals 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.

The idea behind Arbor Metals Corp and First Majestic Silver 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.