Correlation Between First Majestic and Happy Creek

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

Diversification Opportunities for First Majestic and Happy Creek

-0.33

Correlation Coefficient

First Majestic  Happy Creek

Very good diversification

The 3 months correlation between First and Happy is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Happy Creek Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Happy Creek Minerals 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 Happy Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Happy Creek Minerals has no effect on the direction of First Majestic i.e., First Majestic and Happy Creek go up and down completely randomly.

Pair Corralation between First Majestic and Happy Creek

Assuming the 90 days horizon First Majestic Silver is expected to under-perform the Happy Creek. But the stock apears to be less risky and, when comparing its historical volatility, First Majestic Silver is 2.78 times less risky than Happy Creek. The stock trades about -0.01 of its potential returns per unit of risk. The Happy Creek Minerals is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Happy Creek Minerals on September 27, 2024 and sell it today you would earn a total of  2.00  from holding Happy Creek Minerals or generate 40.0% return on investment over 90 days.

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

First Majestic Silver  vs.  Happy Creek Minerals

First Majestic Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Majestic Silver has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, First Majestic is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Happy Creek Minerals

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Happy Creek Minerals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Happy Creek showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Majestic and Happy Creek

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

The idea behind First Majestic Silver and Happy Creek Minerals 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 Transaction History module to view history of all your transactions and understand their impact on performance.