Correlation Between CF Industries and UNITEDHEALTH

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

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

Diversification Opportunities for CF Industries and UNITEDHEALTH

-0.01

Correlation Coefficient

CF Industries  UNITEDHEALTH

Good diversification

The 3 months correlation between CF Industries and UNITEDHEALTH is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings 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 CF Industries 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 CF Industries Holdings 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 CF Industries i.e., CF Industries and UNITEDHEALTH go up and down completely randomly.

Pair Corralation between CF Industries and UNITEDHEALTH

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to under-perform the UNITEDHEALTH. In addition to that, CF Industries is 1.76 times more volatile than UNITEDHEALTH GROUP INC. It trades about -0.14 of its total potential returns per unit of risk. UNITEDHEALTH GROUP INC is currently generating about -0.1 per unit of volatility. If you would invest  6,448  in UNITEDHEALTH GROUP INC on September 21, 2024 and sell it today you would lose (139.00) from holding UNITEDHEALTH GROUP INC or give up 2.16% of portfolio value over 90 days.

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

CF Industries Holdings  vs.  UNITEDHEALTH GROUP INC

CF Industries Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, CF Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

UNITEDHEALTH GROUP INC

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days UNITEDHEALTH GROUP INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for UNITEDHEALTH GROUP INC investors.

Pair Trading with CF Industries and UNITEDHEALTH

The main advantage of trading using opposite CF Industries and UNITEDHEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries 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 CF Industries Holdings 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.