Correlation Between First Majestic and Rackla Metals
Can any of the company-specific risk be diversified away by investing in both First Majestic and Rackla Metals 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 Rackla Metals 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 Rackla Metals, you can compare the effects of market volatilities on First Majestic and Rackla Metals 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 Rackla Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Majestic and Rackla Metals.
Diversification Opportunities for First Majestic and Rackla Metals
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between First and Rackla is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Rackla Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rackla Metals 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 Rackla Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rackla Metals has no effect on the direction of First Majestic i.e., First Majestic and Rackla Metals go up and down completely randomly.
Pair Corralation between First Majestic and Rackla Metals
Assuming the 90 days horizon First Majestic is expected to generate 1.75 times less return on investment than Rackla Metals. But when comparing it to its historical volatility, First Majestic Silver is 2.45 times less risky than Rackla Metals. It trades about 0.12 of its potential returns per unit of risk. Rackla Metals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 8.50 in Rackla Metals on September 11, 2024 and sell it today you would earn a total of 2.50 from holding Rackla Metals or generate 29.41% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 98.44% |
Values | Daily Returns |
First Majestic Silver vs. Rackla Metals
Performance |
Timeline |
First Majestic Silver |
Rackla Metals |
First Majestic and Rackla Metals Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Majestic and Rackla Metals
The main advantage of trading using opposite First Majestic and Rackla Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Majestic position performs unexpectedly, Rackla Metals 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 Rackla Metals will offset losses from the drop in Rackla Metals' long position.First Majestic vs. Labrador Iron Ore | First Majestic vs. Upstart Investments | First Majestic vs. Lion One Metals | First Majestic vs. Mako Mining Corp |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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