Correlation Between UnitedHealth Group and Petro Rio

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

By analyzing existing cross correlation between UnitedHealth Group Incorporated and Petro Rio SA, you can compare the effects of market volatilities on UnitedHealth Group and Petro Rio 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 Petro Rio. Check out your portfolio center. Please also check ongoing floating volatility patterns of UnitedHealth Group and Petro Rio.

Diversification Opportunities for UnitedHealth Group and Petro Rio

-0.39

Correlation Coefficient

UnitedHealth Group  Petro Rio

Very good diversification

The 3 months correlation between UnitedHealth and Petro is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group Incorporate and Petro Rio SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petro Rio SA 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 Incorporated are associated (or correlated) with Petro Rio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petro Rio SA has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Petro Rio go up and down completely randomly.

Pair Corralation between UnitedHealth Group and Petro Rio

Assuming the 90 days trading horizon UnitedHealth Group Incorporated is expected to under-perform the Petro Rio. In addition to that, UnitedHealth Group is 1.65 times more volatile than Petro Rio SA. It trades about -0.01 of its total potential returns per unit of risk. Petro Rio SA is currently generating about 0.43 per unit of volatility. If you would invest  3,925  in Petro Rio SA on October 22, 2024 and sell it today you would earn a total of  346.00  from holding Petro Rio SA or generate 8.82% return on investment over 90 days.

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

UnitedHealth Group Incorporate  vs.  Petro Rio SA

UnitedHealth Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Petro Rio SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Petro Rio SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Petro Rio is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with UnitedHealth Group and Petro Rio

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

The idea behind UnitedHealth Group Incorporated and Petro Rio SA 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.