Correlation Between Fairfax Financial and UnitedHealth Group
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and UnitedHealth Group 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 Fairfax Financial and UnitedHealth Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fairfax Financial Holdings and UnitedHealth Group CDR, you can compare the effects of market volatilities on Fairfax Financial and UnitedHealth Group 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 Fairfax Financial with a short position of UnitedHealth Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and UnitedHealth Group.
Diversification Opportunities for Fairfax Financial and UnitedHealth Group
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Fairfax and UnitedHealth is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and UnitedHealth Group CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group CDR and Fairfax Financial 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 Fairfax Financial Holdings are associated (or correlated) with UnitedHealth Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UnitedHealth Group CDR has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and UnitedHealth Group go up and down completely randomly.
Pair Corralation between Fairfax Financial and UnitedHealth Group
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 1.01 times more return on investment than UnitedHealth Group. However, Fairfax Financial is 1.01 times more volatile than UnitedHealth Group CDR. It trades about 0.13 of its potential returns per unit of risk. UnitedHealth Group CDR is currently generating about 0.02 per unit of risk. If you would invest 77,964 in Fairfax Financial Holdings on September 12, 2024 and sell it today you would earn a total of 121,841 from holding Fairfax Financial Holdings or generate 156.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. UnitedHealth Group CDR
Performance |
| Timeline |
| Fairfax Financial |
| UnitedHealth Group CDR |
Fairfax Financial and UnitedHealth Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and UnitedHealth Group
The main advantage of trading using opposite Fairfax Financial and UnitedHealth Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, UnitedHealth Group 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 UnitedHealth Group will offset losses from the drop in UnitedHealth Group's long position.| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. iA Financial | Fairfax Financial vs. TMX Group Limited | Fairfax Financial vs. Onex Corp |
| UnitedHealth Group vs. Premium Income | UnitedHealth Group vs. E L Financial Corp | UnitedHealth Group vs. Fairfax Financial Holdings | UnitedHealth Group vs. Fairfax Fin Hld |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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