Correlation Between First Majestic and Northern Dynasty

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

Diversification Opportunities for First Majestic and Northern Dynasty

0.77

Correlation Coefficient

First Majestic  Northern Dynasty

Poor diversification

The 3 months correlation between First and Northern is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Northern Dynasty Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Dynasty Minerals 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 Northern Dynasty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Dynasty Minerals has no effect on the direction of First Majestic i.e., First Majestic and Northern Dynasty go up and down completely randomly.

Pair Corralation between First Majestic and Northern Dynasty

Assuming the 90 days horizon First Majestic Silver is expected to generate 0.45 times more return on investment than Northern Dynasty. However, First Majestic Silver is 2.24 times less risky than Northern Dynasty. It trades about 0.14 of its potential returns per unit of risk. Northern Dynasty Minerals is currently generating about 0.05 per unit of risk. If you would invest  841.00  in First Majestic Silver on April 22, 2025 and sell it today you would earn a total of  296.00  from holding First Majestic Silver or generate 35.2% return on investment over 90 days.

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

First Majestic Silver  vs.  Northern Dynasty Minerals

First Majestic Silver

Risk-Adjusted Performance

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. In spite of very uncertain basic indicators, First Majestic displayed solid returns over the last few months and may actually be approaching a breakup point.

Northern Dynasty Minerals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Dynasty Minerals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal primary indicators, Northern Dynasty displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Majestic and Northern Dynasty

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

The idea behind First Majestic Silver and Northern Dynasty Minerals 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.