Correlation Between Palomar Holdings and UNITEDHEALTH

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

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

Diversification Opportunities for Palomar Holdings and UNITEDHEALTH

-0.11

Correlation Coefficient

Palomar Holdings  UNITEDHEALTH

Good diversification

The 3 months correlation between Palomar and UNITEDHEALTH is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Palomar 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 Palomar Holdings 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 Palomar 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 Palomar Holdings i.e., Palomar Holdings and UNITEDHEALTH go up and down completely randomly.

Pair Corralation between Palomar Holdings and UNITEDHEALTH

Given the investment horizon of 90 days Palomar Holdings is expected to generate 2.95 times more return on investment than UNITEDHEALTH. However, Palomar Holdings is 2.95 times more volatile than UNITEDHEALTH GROUP INC. It trades about -0.03 of its potential returns per unit of risk. UNITEDHEALTH GROUP INC is currently generating about -0.17 per unit of risk. If you would invest  10,738  in Palomar Holdings on October 10, 2024 and sell it today you would lose (151.00) from holding Palomar Holdings or give up 1.41% of portfolio value over 90 days.

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

Palomar Holdings  vs.  UNITEDHEALTH GROUP INC

Palomar Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Palomar Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating primary indicators, Palomar Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

UNITEDHEALTH GROUP INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNITEDHEALTH GROUP INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, UNITEDHEALTH is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Palomar Holdings and UNITEDHEALTH

The main advantage of trading using opposite Palomar Holdings and UNITEDHEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palomar Holdings 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 Palomar 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .