Correlation Between First Majestic and ConocoPhillips

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

Diversification Opportunities for First Majestic and ConocoPhillips

-0.19

Correlation Coefficient

First Majestic  ConocoPhillips

Good diversification

The 3 months correlation between First and ConocoPhillips is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips 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 ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of First Majestic i.e., First Majestic and ConocoPhillips go up and down completely randomly.

Pair Corralation between First Majestic and ConocoPhillips

Assuming the 90 days horizon First Majestic Silver is expected to under-perform the ConocoPhillips. But the stock apears to be less risky and, when comparing its historical volatility, First Majestic Silver is 2.77 times less risky than ConocoPhillips. The stock trades about -0.1 of its potential returns per unit of risk. The ConocoPhillips is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  194,173  in ConocoPhillips on September 29, 2024 and sell it today you would earn a total of  10,827  from holding ConocoPhillips or generate 5.58% 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.  ConocoPhillips

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 fairly strong primary indicators, First Majestic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ConocoPhillips

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ConocoPhillips are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, ConocoPhillips may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with First Majestic and ConocoPhillips

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

The idea behind First Majestic Silver and ConocoPhillips 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.