Correlation Between UnitedHealth Group and Hemisphere Energy

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

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

Diversification Opportunities for UnitedHealth Group and Hemisphere Energy

0.06

Correlation Coefficient

UnitedHealth Group  Hemisphere Energy

Significant diversification

The 3 months correlation between UnitedHealth and Hemisphere is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group CDR and Hemisphere Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hemisphere Energy and UnitedHealth Group 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 UnitedHealth Group CDR are associated (or correlated) with Hemisphere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hemisphere Energy has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Hemisphere Energy go up and down completely randomly.

Pair Corralation between UnitedHealth Group and Hemisphere Energy

Assuming the 90 days trading horizon UnitedHealth Group is expected to generate 1.52 times less return on investment than Hemisphere Energy. In addition to that, UnitedHealth Group is 1.05 times more volatile than Hemisphere Energy. It trades about 0.02 of its total potential returns per unit of risk. Hemisphere Energy is currently generating about 0.03 per unit of volatility. If you would invest  170.00  in Hemisphere Energy on September 29, 2024 and sell it today you would earn a total of  9.00  from holding Hemisphere Energy or generate 5.29% return on investment over 90 days.

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

UnitedHealth Group CDR  vs.  Hemisphere Energy

UnitedHealth Group CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UnitedHealth Group CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Hemisphere Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hemisphere Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hemisphere Energy is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with UnitedHealth Group and Hemisphere Energy

The main advantage of trading using opposite UnitedHealth Group and Hemisphere Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UnitedHealth Group position performs unexpectedly, Hemisphere Energy 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 Hemisphere Energy will offset losses from the drop in Hemisphere Energy's long position.

The idea behind UnitedHealth Group CDR and Hemisphere Energy 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.