Correlation Between Cars and UNITEDHEALTH

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

By analyzing existing cross correlation between Cars Inc and UNITEDHEALTH GROUP INC, you can compare the effects of market volatilities on Cars and UNITEDHEALTH 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 Cars with a short position of UNITEDHEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and UNITEDHEALTH.

Diversification Opportunities for Cars and UNITEDHEALTH

-0.34

Correlation Coefficient

Cars  UNITEDHEALTH

Very good diversification

The 3 months correlation between Cars and UNITEDHEALTH is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and UNITEDHEALTH GROUP INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITEDHEALTH GROUP INC and Cars 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 Cars Inc are associated (or correlated) with UNITEDHEALTH. 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 INC has no effect on the direction of Cars i.e., Cars and UNITEDHEALTH go up and down completely randomly.

Pair Corralation between Cars and UNITEDHEALTH

Given the investment horizon of 90 days Cars Inc is expected to generate 1.84 times more return on investment than UNITEDHEALTH. However, Cars is 1.84 times more volatile than UNITEDHEALTH GROUP INC. It trades about 0.01 of its potential returns per unit of risk. UNITEDHEALTH GROUP INC is currently generating about 0.01 per unit of risk. If you would invest  1,763  in Cars Inc on October 6, 2024 and sell it today you would lose (50.00) from holding Cars Inc or give up 2.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.18%
Values	Daily Returns

Cars Inc  vs.  UNITEDHEALTH GROUP INC

Cars Inc

Risk-Adjusted Performance

7 of 100

OK

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

UNITEDHEALTH GROUP INC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UNITEDHEALTH GROUP INC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, UNITEDHEALTH is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cars and UNITEDHEALTH

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

The idea behind Cars Inc and UNITEDHEALTH GROUP INC 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.