Correlation Between UNITEDHEALTH and CF Industries

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

Diversification Opportunities for UNITEDHEALTH and CF Industries

-0.13

Correlation Coefficient

UNITEDHEALTH  CF Industries

Good diversification

The 3 months correlation between UNITEDHEALTH and CF Industries is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding UNITEDHEALTH GROUP INC and CF Industries Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Industries Holdings 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 CF Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Industries Holdings has no effect on the direction of UNITEDHEALTH i.e., UNITEDHEALTH and CF Industries go up and down completely randomly.

Pair Corralation between UNITEDHEALTH and CF Industries

Assuming the 90 days trading horizon UNITEDHEALTH is expected to generate 1.81 times less return on investment than CF Industries. But when comparing it to its historical volatility, UNITEDHEALTH GROUP INC is 1.38 times less risky than CF Industries. It trades about 0.02 of its potential returns per unit of risk. CF Industries Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7,911  in CF Industries Holdings on October 1, 2024 and sell it today you would earn a total of  564.00  from holding CF Industries Holdings or generate 7.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.18%
Values	Daily Returns

UNITEDHEALTH GROUP INC  vs.  CF Industries Holdings

UNITEDHEALTH GROUP INC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UNITEDHEALTH GROUP INC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

CF Industries Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CF Industries Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, CF Industries is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with UNITEDHEALTH and CF Industries

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

The idea behind UNITEDHEALTH GROUP INC and CF Industries Holdings 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.