Correlation Between First Majestic and Mastercard Incorporated

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

Diversification Opportunities for First Majestic and Mastercard Incorporated

-0.59

Correlation Coefficient

First Majestic  Mastercard Incorporated

Excellent diversification

The 3 months correlation between First and Mastercard is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Mastercard Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard Incorporated 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 Mastercard Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard Incorporated has no effect on the direction of First Majestic i.e., First Majestic and Mastercard Incorporated go up and down completely randomly.

Pair Corralation between First Majestic and Mastercard Incorporated

Assuming the 90 days horizon First Majestic Silver is expected to under-perform the Mastercard Incorporated. But the stock apears to be less risky and, when comparing its historical volatility, First Majestic Silver is 1.68 times less risky than Mastercard Incorporated. The stock trades about -0.1 of its potential returns per unit of risk. The Mastercard Incorporated is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  975,552  in Mastercard Incorporated on September 29, 2024 and sell it today you would earn a total of  110,548  from holding Mastercard Incorporated or generate 11.33% return on investment over 90 days.

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

First Majestic Silver  vs.  Mastercard Incorporated

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.

Mastercard Incorporated

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard Incorporated are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Mastercard Incorporated may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with First Majestic and Mastercard Incorporated

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

The idea behind First Majestic Silver and Mastercard Incorporated 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.