Correlation Between GE Aerospace and UNITEDHEALTH

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

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

Diversification Opportunities for GE Aerospace and UNITEDHEALTH

0.39

Correlation Coefficient

GE Aerospace  UNITEDHEALTH

Weak diversification

The 3 months correlation between GE Aerospace and UNITEDHEALTH is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace 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 GE Aerospace 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 GE Aerospace 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 GE Aerospace i.e., GE Aerospace and UNITEDHEALTH go up and down completely randomly.

Pair Corralation between GE Aerospace and UNITEDHEALTH

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 2.46 times less return on investment than UNITEDHEALTH. But when comparing it to its historical volatility, GE Aerospace is 1.17 times less risky than UNITEDHEALTH. It trades about 0.03 of its potential returns per unit of risk. UNITEDHEALTH GROUP INC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  11,779  in UNITEDHEALTH GROUP INC on October 9, 2024 and sell it today you would earn a total of  257.00  from holding UNITEDHEALTH GROUP INC or generate 2.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

GE Aerospace  vs.  UNITEDHEALTH GROUP INC

GE Aerospace

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GE Aerospace has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

UNITEDHEALTH GROUP INC

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UNITEDHEALTH GROUP INC are ranked lower than 1 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GE Aerospace and UNITEDHEALTH

The main advantage of trading using opposite GE Aerospace and UNITEDHEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace 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 GE Aerospace 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.