Correlation Between UNITEDHEALTH and Catalyst Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both UNITEDHEALTH and Catalyst Pharmaceuticals 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 Catalyst Pharmaceuticals 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 Catalyst Pharmaceuticals, you can compare the effects of market volatilities on UNITEDHEALTH and Catalyst Pharmaceuticals 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 Catalyst Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITEDHEALTH and Catalyst Pharmaceuticals.

Diversification Opportunities for UNITEDHEALTH and Catalyst Pharmaceuticals

-0.21

Correlation Coefficient

UNITEDHEALTH  Catalyst Pharmaceuticals

Very good diversification

The 3 months correlation between UNITEDHEALTH and Catalyst is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding UNITEDHEALTH GROUP INC and Catalyst Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Pharmaceuticals 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 Catalyst Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Pharmaceuticals has no effect on the direction of UNITEDHEALTH i.e., UNITEDHEALTH and Catalyst Pharmaceuticals go up and down completely randomly.

Pair Corralation between UNITEDHEALTH and Catalyst Pharmaceuticals

Assuming the 90 days trading horizon UNITEDHEALTH is expected to generate 26.9 times less return on investment than Catalyst Pharmaceuticals. But when comparing it to its historical volatility, UNITEDHEALTH GROUP INC is 11.93 times less risky than Catalyst Pharmaceuticals. It trades about 0.01 of its potential returns per unit of risk. Catalyst Pharmaceuticals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,806  in Catalyst Pharmaceuticals on September 21, 2024 and sell it today you would earn a total of  340.00  from holding Catalyst Pharmaceuticals or generate 18.83% return on investment over 90 days.

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

UNITEDHEALTH GROUP INC  vs.  Catalyst Pharmaceuticals

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.

Catalyst Pharmaceuticals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Pharmaceuticals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Catalyst Pharmaceuticals is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with UNITEDHEALTH and Catalyst Pharmaceuticals

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

The idea behind UNITEDHEALTH GROUP INC and Catalyst Pharmaceuticals 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.