Correlation Between UNITEDHEALTH and Arrow Financial

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

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

Diversification Opportunities for UNITEDHEALTH and Arrow Financial

0.48

Correlation Coefficient

UNITEDHEALTH  Arrow Financial

Very weak diversification

The 3 months correlation between UNITEDHEALTH and Arrow is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding UNITEDHEALTH GROUP INC and Arrow Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Financial and UNITEDHEALTH 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 INC are associated (or correlated) with Arrow Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Financial has no effect on the direction of UNITEDHEALTH i.e., UNITEDHEALTH and Arrow Financial go up and down completely randomly.

Pair Corralation between UNITEDHEALTH and Arrow Financial

Assuming the 90 days trading horizon UNITEDHEALTH GROUP INC is expected to generate 0.24 times more return on investment than Arrow Financial. However, UNITEDHEALTH GROUP INC is 4.25 times less risky than Arrow Financial. It trades about -0.2 of its potential returns per unit of risk. Arrow Financial is currently generating about -0.52 per unit of risk. If you would invest  9,857  in UNITEDHEALTH GROUP INC on October 14, 2024 and sell it today you would lose (177.00) from holding UNITEDHEALTH GROUP INC or give up 1.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

UNITEDHEALTH GROUP INC  vs.  Arrow Financial

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.

Arrow Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arrow Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with UNITEDHEALTH and Arrow Financial

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

The idea behind UNITEDHEALTH GROUP INC and Arrow Financial 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.