Correlation Between Foraco International and First Majestic

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

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

Diversification Opportunities for Foraco International and First Majestic

0.66

Correlation Coefficient

Foraco International  First Majestic

Poor diversification

The 3 months correlation between Foraco and First is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Foraco International SA 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 Foraco International 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 Foraco International SA 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 Foraco International i.e., Foraco International and First Majestic go up and down completely randomly.

Pair Corralation between Foraco International and First Majestic

Assuming the 90 days trading horizon Foraco International SA is expected to generate 0.74 times more return on investment than First Majestic. However, Foraco International SA is 1.35 times less risky than First Majestic. It trades about 0.05 of its potential returns per unit of risk. First Majestic Silver is currently generating about 0.0 per unit of risk. If you would invest  151.00  in Foraco International SA on September 5, 2024 and sell it today you would earn a total of  83.00  from holding Foraco International SA or generate 54.97% return on investment over 90 days.

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

Foraco International SA  vs.  First Majestic Silver

Foraco International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Foraco International SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Foraco International displayed solid returns over the last few months and may actually be approaching a breakup point.

First Majestic Silver

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Majestic Silver are ranked lower than 11 (%) 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.

Pair Trading with Foraco International and First Majestic

The main advantage of trading using opposite Foraco International and First Majestic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foraco International 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 Foraco International SA 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.