Correlation Between First Majestic and Silvercorp Metals

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

Diversification Opportunities for First Majestic and Silvercorp Metals

0.95

Correlation Coefficient

First Majestic  Silvercorp Metals

Almost no diversification

The 3 months correlation between First and Silvercorp is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Silvercorp Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silvercorp Metals 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 Silvercorp Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silvercorp Metals has no effect on the direction of First Majestic i.e., First Majestic and Silvercorp Metals go up and down completely randomly.

Pair Corralation between First Majestic and Silvercorp Metals

Allowing for the 90-day total investment horizon First Majestic Silver is expected to generate 1.61 times more return on investment than Silvercorp Metals. However, First Majestic is 1.61 times more volatile than Silvercorp Metals. It trades about 0.2 of its potential returns per unit of risk. Silvercorp Metals is currently generating about 0.25 per unit of risk. If you would invest  558.00  in First Majestic Silver on January 20, 2024 and sell it today you would earn a total of  119.00  from holding First Majestic Silver or generate 21.33% return on investment over 90 days.

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

First Majestic Silver  vs.  Silvercorp Metals

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. 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.

Silvercorp Metals

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Silvercorp Metals are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Silvercorp Metals displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Majestic and Silvercorp Metals

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

The idea behind First Majestic Silver and Silvercorp Metals 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.