Correlation Between UNITEDHEALTH and American Axle

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

Diversification Opportunities for UNITEDHEALTH and American Axle

-0.54

Correlation Coefficient

UNITEDHEALTH  American Axle

Excellent diversification

The 3 months correlation between UNITEDHEALTH and American is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding UNITEDHEALTH GROUP INC and American Axle Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Axle Manufa 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 American Axle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Axle Manufa has no effect on the direction of UNITEDHEALTH i.e., UNITEDHEALTH and American Axle go up and down completely randomly.

Pair Corralation between UNITEDHEALTH and American Axle

Assuming the 90 days trading horizon UNITEDHEALTH GROUP INC is expected to under-perform the American Axle. But the bond apears to be less risky and, when comparing its historical volatility, UNITEDHEALTH GROUP INC is 4.84 times less risky than American Axle. The bond trades about -0.16 of its potential returns per unit of risk. The American Axle Manufacturing is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  608.00  in American Axle Manufacturing on September 18, 2024 and sell it today you would earn a total of  21.00  from holding American Axle Manufacturing or generate 3.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

UNITEDHEALTH GROUP INC  vs.  American Axle Manufacturing

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 latest stock price disturbance, may contribute to short-term losses for the investors.

American Axle Manufa

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Axle Manufacturing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, American Axle is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with UNITEDHEALTH and American Axle

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

The idea behind UNITEDHEALTH GROUP INC and American Axle Manufacturing 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.