Correlation Between First Majestic and Caledonia Mining

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

Diversification Opportunities for First Majestic and Caledonia Mining

0.81

Correlation Coefficient

First Majestic  Caledonia Mining

Very poor diversification

The 3 months correlation between First and Caledonia is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Caledonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Mining 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 Caledonia Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caledonia Mining has no effect on the direction of First Majestic i.e., First Majestic and Caledonia Mining go up and down completely randomly.

Pair Corralation between First Majestic and Caledonia Mining

Allowing for the 90-day total investment horizon First Majestic is expected to generate 1.52 times less return on investment than Caledonia Mining. But when comparing it to its historical volatility, First Majestic Silver is 1.03 times less risky than Caledonia Mining. It trades about 0.12 of its potential returns per unit of risk. Caledonia Mining is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,300  in Caledonia Mining on May 4, 2025 and sell it today you would earn a total of  688.00  from holding Caledonia Mining or generate 52.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

First Majestic Silver  vs.  Caledonia Mining

First Majestic Silver

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Majestic Silver are ranked lower than 9 (%) 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.

Caledonia Mining

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Caledonia Mining are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental indicators, Caledonia Mining disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Majestic and Caledonia Mining

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

The idea behind First Majestic Silver and Caledonia Mining 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.