Correlation Between First Majestic and UTStarcom Holdings

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

Diversification Opportunities for First Majestic and UTStarcom Holdings

0.33

Correlation Coefficient

First Majestic  UTStarcom Holdings

Weak diversification

The 3 months correlation between First and UTStarcom is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and UTStarcom Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UTStarcom Holdings Corp 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 UTStarcom Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UTStarcom Holdings Corp has no effect on the direction of First Majestic i.e., First Majestic and UTStarcom Holdings go up and down completely randomly.

Pair Corralation between First Majestic and UTStarcom Holdings

Assuming the 90 days horizon First Majestic Silver is expected to generate 0.43 times more return on investment than UTStarcom Holdings. However, First Majestic Silver is 2.32 times less risky than UTStarcom Holdings. It trades about 0.02 of its potential returns per unit of risk. UTStarcom Holdings Corp is currently generating about -0.03 per unit of risk. If you would invest  42,884  in First Majestic Silver on October 7, 2024 and sell it today you would earn a total of  3,016  from holding First Majestic Silver or generate 7.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

First Majestic Silver  vs.  UTStarcom Holdings Corp

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 latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

UTStarcom Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UTStarcom Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, UTStarcom Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Majestic and UTStarcom Holdings

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

The idea behind First Majestic Silver and UTStarcom Holdings Corp 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.