Correlation Between First Majestic and Bear Creek

Can any of the company-specific risk be diversified away by investing in both First Majestic and Bear Creek 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 Bear Creek 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 Bear Creek Mining, you can compare the effects of market volatilities on First Majestic and Bear Creek 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 Bear Creek. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Majestic and Bear Creek.

Diversification Opportunities for First Majestic and Bear Creek

0.91

Correlation Coefficient

First Majestic  Bear Creek

Almost no diversification

The 3 months correlation between First and Bear is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Bear Creek Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bear Creek Mining 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 Bear Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bear Creek Mining has no effect on the direction of First Majestic i.e., First Majestic and Bear Creek go up and down completely randomly.

Pair Corralation between First Majestic and Bear Creek

Assuming the 90 days horizon First Majestic is expected to generate 3.4 times less return on investment than Bear Creek. But when comparing it to its historical volatility, First Majestic Silver is 1.74 times less risky than Bear Creek. It trades about 0.04 of its potential returns per unit of risk. Bear Creek Mining is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Bear Creek Mining on September 14, 2024 and sell it today you would earn a total of  22.00  from holding Bear Creek Mining or generate 115.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.63%
Values	Daily Returns

First Majestic Silver  vs.  Bear Creek Mining

First Majestic Silver

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Majestic Silver are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, First Majestic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bear Creek Mining

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bear Creek Mining are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Bear Creek showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Majestic and Bear Creek

The main advantage of trading using opposite First Majestic and Bear Creek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Majestic position performs unexpectedly, Bear Creek 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 Bear Creek will offset losses from the drop in Bear Creek's long position.

The idea behind First Majestic Silver and Bear Creek Mining 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.