Correlation Between UNITEDHEALTH and Li Auto

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

Diversification Opportunities for UNITEDHEALTH and Li Auto

0.05

Correlation Coefficient

UNITEDHEALTH  Li Auto

Significant diversification

The 3 months correlation between UNITEDHEALTH and Li Auto is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding UNITEDHEALTH GROUP INC and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto 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 Li Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Auto has no effect on the direction of UNITEDHEALTH i.e., UNITEDHEALTH and Li Auto go up and down completely randomly.

Pair Corralation between UNITEDHEALTH and Li Auto

Assuming the 90 days trading horizon UNITEDHEALTH GROUP INC is expected to under-perform the Li Auto. But the bond apears to be less risky and, when comparing its historical volatility, UNITEDHEALTH GROUP INC is 3.96 times less risky than Li Auto. The bond trades about -0.19 of its potential returns per unit of risk. The Li Auto is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,298  in Li Auto on September 18, 2024 and sell it today you would lose (58.00) from holding Li Auto or give up 2.52% of portfolio value over 90 days.

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

UNITEDHEALTH GROUP INC  vs.  Li Auto

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.

Li Auto

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Li Auto are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward indicators, Li Auto demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UNITEDHEALTH and Li Auto

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

The idea behind UNITEDHEALTH GROUP INC and Li Auto 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.