Correlation Between First Majestic and Focus Graphite

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

Diversification Opportunities for First Majestic and Focus Graphite

-0.67

Correlation Coefficient

First Majestic  Focus Graphite

Excellent diversification

The 3 months correlation between First and Focus is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Focus Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Graphite 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 Focus Graphite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Graphite has no effect on the direction of First Majestic i.e., First Majestic and Focus Graphite go up and down completely randomly.

Pair Corralation between First Majestic and Focus Graphite

Assuming the 90 days horizon First Majestic Silver is expected to generate 0.72 times more return on investment than Focus Graphite. However, First Majestic Silver is 1.38 times less risky than Focus Graphite. It trades about 0.01 of its potential returns per unit of risk. Focus Graphite is currently generating about -0.05 per unit of risk. If you would invest  937.00  in First Majestic Silver on September 4, 2024 and sell it today you would lose (45.00) from holding First Majestic Silver or give up 4.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

First Majestic Silver  vs.  Focus Graphite

First Majestic Silver

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Majestic Silver are ranked lower than 8 (%) 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.

Focus Graphite

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Focus Graphite 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.

Pair Trading with First Majestic and Focus Graphite

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

The idea behind First Majestic Silver and Focus Graphite 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.