Correlation Between Definity Financial and UnitedHealth Group

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

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

Diversification Opportunities for Definity Financial and UnitedHealth Group

-0.47

Correlation Coefficient

Definity Financial  UnitedHealth Group

Very good diversification

The 3 months correlation between Definity and UnitedHealth is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Definity Financial Corp 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 Definity Financial 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 Definity Financial Corp 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 Definity Financial i.e., Definity Financial and UnitedHealth Group go up and down completely randomly.

Pair Corralation between Definity Financial and UnitedHealth Group

Assuming the 90 days trading horizon Definity Financial Corp is expected to generate 0.77 times more return on investment than UnitedHealth Group. However, Definity Financial Corp is 1.3 times less risky than UnitedHealth Group. It trades about 0.04 of its potential returns per unit of risk. UnitedHealth Group CDR is currently generating about 0.02 per unit of risk. If you would invest  5,823  in Definity Financial Corp on December 25, 2024 and sell it today you would earn a total of  161.00  from holding Definity Financial Corp or generate 2.76% return on investment over 90 days.

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

Definity Financial Corp  vs.  UnitedHealth Group CDR

Definity Financial Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Definity Financial Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Definity Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

UnitedHealth Group CDR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UnitedHealth Group CDR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, UnitedHealth Group is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Definity Financial and UnitedHealth Group

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