Correlation Between Pilbara Minerals and First American

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

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

Diversification Opportunities for Pilbara Minerals and First American

0.07

Correlation Coefficient

Pilbara Minerals  First American

Significant diversification

The 3 months correlation between Pilbara and First is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Pilbara Minerals Limited and First American Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American Silver and Pilbara Minerals 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 Pilbara Minerals Limited are associated (or correlated) with First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American Silver has no effect on the direction of Pilbara Minerals i.e., Pilbara Minerals and First American go up and down completely randomly.

Pair Corralation between Pilbara Minerals and First American

Assuming the 90 days horizon Pilbara Minerals is expected to generate 48.07 times less return on investment than First American. But when comparing it to its historical volatility, Pilbara Minerals Limited is 27.09 times less risky than First American. It trades about 0.06 of its potential returns per unit of risk. First American Silver is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.01  in First American Silver on May 3, 2025 and sell it today you would earn a total of  0.00  from holding First American Silver or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Pilbara Minerals Limited  vs.  First American Silver

Pilbara Minerals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pilbara Minerals Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Pilbara Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

First American Silver

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First American Silver are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, First American sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pilbara Minerals and First American

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

The idea behind Pilbara Minerals Limited and First American 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.