Correlation Between United States and First Majestic

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

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

Diversification Opportunities for United States and First Majestic

0.47

Correlation Coefficient

United States  First Majestic

Very weak diversification

The 3 months correlation between United and First is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel 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 United States 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 United States Steel 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 United States i.e., United States and First Majestic go up and down completely randomly.

Pair Corralation between United States and First Majestic

Given the investment horizon of 90 days United States Steel is expected to generate 3.39 times more return on investment than First Majestic. However, United States is 3.39 times more volatile than First Majestic Silver. It trades about 0.03 of its potential returns per unit of risk. First Majestic Silver is currently generating about 0.02 per unit of risk. If you would invest  52,474  in United States Steel on October 12, 2024 and sell it today you would earn a total of  17,626  from holding United States Steel or generate 33.59% return on investment over 90 days.

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

United States Steel  vs.  First Majestic Silver

United States Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, United States is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 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.

Pair Trading with United States and First Majestic

The main advantage of trading using opposite United States and First Majestic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Steel 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.