Correlation Between Constellium and First Majestic

Can any of the company-specific risk be diversified away by investing in both Constellium and First Majestic 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 Constellium and First Majestic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Constellium Nv and First Majestic Silver, you can compare the effects of market volatilities on Constellium and First Majestic 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 Constellium with a short position of First Majestic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellium and First Majestic.

Diversification Opportunities for Constellium and First Majestic

-0.58

Correlation Coefficient

Constellium  First Majestic

Excellent diversification

The 3 months correlation between Constellium and First is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Constellium Nv and First Majestic Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Majestic Silver and Constellium 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 Constellium Nv are associated (or correlated) with First Majestic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Majestic Silver has no effect on the direction of Constellium i.e., Constellium and First Majestic go up and down completely randomly.

Pair Corralation between Constellium and First Majestic

Given the investment horizon of 90 days Constellium Nv is expected to generate 0.66 times more return on investment than First Majestic. However, Constellium Nv is 1.51 times less risky than First Majestic. It trades about 0.22 of its potential returns per unit of risk. First Majestic Silver is currently generating about -0.15 per unit of risk. If you would invest  1,119  in Constellium Nv on September 5, 2024 and sell it today you would earn a total of  107.00  from holding Constellium Nv or generate 9.56% return on investment over 90 days.

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

Constellium Nv  vs.  First Majestic Silver

Constellium Nv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Constellium Nv has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

First Majestic Silver

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Majestic Silver are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, First Majestic reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Constellium and First Majestic

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

The idea behind Constellium Nv and First Majestic Silver 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.