Correlation Between Brookfield and UnitedHealth Group

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

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

Diversification Opportunities for Brookfield and UnitedHealth Group

0.02

Correlation Coefficient

Brookfield  UnitedHealth Group

Significant diversification

The 3 months correlation between Brookfield and UnitedHealth is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield 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 Brookfield 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 Brookfield 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 Brookfield i.e., Brookfield and UnitedHealth Group go up and down completely randomly.

Pair Corralation between Brookfield and UnitedHealth Group

Assuming the 90 days horizon Brookfield is expected to generate 0.88 times more return on investment than UnitedHealth Group. However, Brookfield is 1.14 times less risky than UnitedHealth Group. It trades about 0.18 of its potential returns per unit of risk. UnitedHealth Group CDR is currently generating about 0.0 per unit of risk. If you would invest  5,414  in Brookfield on September 18, 2024 and sell it today you would earn a total of  3,030  from holding Brookfield or generate 55.97% return on investment over 90 days.

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

Brookfield  vs.  UnitedHealth Group CDR

Brookfield

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Brookfield 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 unfluctuating 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.

Pair Trading with Brookfield and UnitedHealth Group

The main advantage of trading using opposite Brookfield and UnitedHealth Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield 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 Brookfield 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.