Correlation Between NextSource Materials and UnitedHealth Group

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

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

Diversification Opportunities for NextSource Materials and UnitedHealth Group

-0.7

Correlation Coefficient

NextSource Materials  UnitedHealth Group

Excellent diversification

The 3 months correlation between NextSource and UnitedHealth is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and UnitedHealth Group CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group CDR and NextSource Materials 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 NextSource Materials are associated (or correlated) with UnitedHealth Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UnitedHealth Group CDR has no effect on the direction of NextSource Materials i.e., NextSource Materials and UnitedHealth Group go up and down completely randomly.

Pair Corralation between NextSource Materials and UnitedHealth Group

Assuming the 90 days trading horizon NextSource Materials is expected to under-perform the UnitedHealth Group. In addition to that, NextSource Materials is 2.75 times more volatile than UnitedHealth Group CDR. It trades about -0.04 of its total potential returns per unit of risk. UnitedHealth Group CDR is currently generating about 0.02 per unit of volatility. If you would invest  2,248  in UnitedHealth Group CDR on September 26, 2024 and sell it today you would earn a total of  153.00  from holding UnitedHealth Group CDR or generate 6.81% return on investment over 90 days.

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

NextSource Materials  vs.  UnitedHealth Group CDR

NextSource Materials

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NextSource Materials are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, NextSource Materials displayed solid returns over the last few months and may actually be approaching a breakup point.

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with NextSource Materials and UnitedHealth Group

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

The idea behind NextSource Materials and UnitedHealth Group CDR 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.