Correlation Between North American and UnitedHealth Group

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

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

Diversification Opportunities for North American and UnitedHealth Group

0.47

Correlation Coefficient

North American  UnitedHealth Group

Very weak diversification

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

Pair Corralation between North American and UnitedHealth Group

Assuming the 90 days trading horizon North American Construction is expected to under-perform the UnitedHealth Group. In addition to that, North American is 1.11 times more volatile than UnitedHealth Group CDR. It trades about -0.21 of its total potential returns per unit of risk. UnitedHealth Group CDR is currently generating about 0.03 per unit of volatility. If you would invest  2,390  in UnitedHealth Group CDR on December 24, 2024 and sell it today you would earn a total of  58.00  from holding UnitedHealth Group CDR or generate 2.43% return on investment over 90 days.

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

North American Construction  vs.  UnitedHealth Group CDR

North American Const

Risk-Adjusted Performance

Very Weak

Over the last 90 days North American Construction 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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm 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 2 (%) 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 North American and UnitedHealth Group

The main advantage of trading using opposite North American and UnitedHealth Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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 North American Construction 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.