Correlation Between UnitedHealth Group and First Majestic

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

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

Diversification Opportunities for UnitedHealth Group and First Majestic

0.1

Correlation Coefficient

UnitedHealth Group  First Majestic

Average diversification

The 3 months correlation between UnitedHealth and First is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group CDR and First Majestic Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Majestic Silver and UnitedHealth Group 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 UnitedHealth Group CDR are associated (or correlated) with First Majestic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Majestic Silver has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and First Majestic go up and down completely randomly.

Pair Corralation between UnitedHealth Group and First Majestic

Assuming the 90 days trading horizon UnitedHealth Group CDR is expected to under-perform the First Majestic. But the stock apears to be less risky and, when comparing its historical volatility, UnitedHealth Group CDR is 1.62 times less risky than First Majestic. The stock trades about -0.09 of its potential returns per unit of risk. The First Majestic Silver is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  851.00  in First Majestic Silver on September 27, 2024 and sell it today you would lose (46.00) from holding First Majestic Silver or give up 5.41% of portfolio value over 90 days.

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

UnitedHealth Group CDR  vs.  First Majestic Silver

UnitedHealth Group CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UnitedHealth Group CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

First Majestic Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Majestic Silver has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, First Majestic is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with UnitedHealth Group and First Majestic

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

The idea behind UnitedHealth Group CDR and First Majestic 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.