Correlation Between Fortuna Silver and First Majestic

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

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

Diversification Opportunities for Fortuna Silver and First Majestic

0.85

Correlation Coefficient

Fortuna Silver  First Majestic

Very poor diversification

The 3 months correlation between Fortuna and First is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Fortuna Silver Mines 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 Fortuna Silver 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 Fortuna Silver Mines 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 Fortuna Silver i.e., Fortuna Silver and First Majestic go up and down completely randomly.

Pair Corralation between Fortuna Silver and First Majestic

Considering the 90-day investment horizon Fortuna Silver Mines is expected to generate 0.86 times more return on investment than First Majestic. However, Fortuna Silver Mines is 1.16 times less risky than First Majestic. It trades about -0.04 of its potential returns per unit of risk. First Majestic Silver is currently generating about -0.28 per unit of risk. If you would invest  490.00  in Fortuna Silver Mines on September 2, 2024 and sell it today you would lose (12.00) from holding Fortuna Silver Mines or give up 2.45% of portfolio value over 90 days.

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

Fortuna Silver Mines  vs.  First Majestic Silver

Fortuna Silver Mines

Risk-Adjusted Performance

5 of 100

Modest

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

First Majestic Silver

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Majestic Silver are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile 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 Fortuna Silver and First Majestic

The main advantage of trading using opposite Fortuna Silver and First Majestic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortuna Silver 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 Fortuna Silver Mines 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.