Correlation Between First Majestic and Vulcan Minerals

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

Diversification Opportunities for First Majestic and Vulcan Minerals

0.61

Correlation Coefficient

First Majestic  Vulcan Minerals

Poor diversification

The 3 months correlation between First and Vulcan is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Vulcan Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan 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 Vulcan Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Minerals has no effect on the direction of First Majestic i.e., First Majestic and Vulcan Minerals go up and down completely randomly.

Pair Corralation between First Majestic and Vulcan Minerals

Assuming the 90 days horizon First Majestic Silver is expected to generate 0.66 times more return on investment than Vulcan Minerals. However, First Majestic Silver is 1.51 times less risky than Vulcan Minerals. It trades about 0.0 of its potential returns per unit of risk. Vulcan Minerals is currently generating about -0.02 per unit of risk. If you would invest  1,146  in First Majestic Silver on September 24, 2024 and sell it today you would lose (361.00) from holding First Majestic Silver or give up 31.5% of portfolio value over 90 days.

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

First Majestic Silver  vs.  Vulcan 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 recent stock price disarray, may contribute to short-term losses for the investors.

Vulcan Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vulcan Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Vulcan Minerals is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First Majestic and Vulcan Minerals

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

The idea behind First Majestic Silver and Vulcan 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.