Correlation Between First Majestic and AngloGold Ashanti

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

Diversification Opportunities for First Majestic and AngloGold Ashanti

0.85

Correlation Coefficient

First Majestic  AngloGold Ashanti

Very poor diversification

The 3 months correlation between First and AngloGold is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and AngloGold Ashanti plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AngloGold Ashanti plc 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 AngloGold Ashanti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AngloGold Ashanti plc has no effect on the direction of First Majestic i.e., First Majestic and AngloGold Ashanti go up and down completely randomly.

Pair Corralation between First Majestic and AngloGold Ashanti

Allowing for the 90-day total investment horizon First Majestic Silver is expected to generate 1.47 times more return on investment than AngloGold Ashanti. However, First Majestic is 1.47 times more volatile than AngloGold Ashanti plc. It trades about 0.24 of its potential returns per unit of risk. AngloGold Ashanti plc is currently generating about 0.17 per unit of risk. If you would invest  460.00  in First Majestic Silver on January 25, 2024 and sell it today you would earn a total of  222.00  from holding First Majestic Silver or generate 48.26% return on investment over 90 days.

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

First Majestic Silver  vs.  AngloGold Ashanti plc

First Majestic Silver

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Majestic Silver are ranked lower than 12 (%) 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.

AngloGold Ashanti plc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AngloGold Ashanti plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, AngloGold Ashanti unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Majestic and AngloGold Ashanti

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

The idea behind First Majestic Silver and AngloGold Ashanti plc 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.