Correlation Between National Bank and UnitedHealth Group
Can any of the company-specific risk be diversified away by investing in both National Bank 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 National Bank and UnitedHealth Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Bank of and UnitedHealth Group CDR, you can compare the effects of market volatilities on National Bank 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 National Bank with a short position of UnitedHealth Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and UnitedHealth Group.
Diversification Opportunities for National Bank and UnitedHealth Group
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between National and UnitedHealth is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of 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 National Bank 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 National Bank of 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 National Bank i.e., National Bank and UnitedHealth Group go up and down completely randomly.
Pair Corralation between National Bank and UnitedHealth Group
Assuming the 90 days trading horizon National Bank is expected to generate 5.05 times less return on investment than UnitedHealth Group. But when comparing it to its historical volatility, National Bank of is 5.73 times less risky than UnitedHealth Group. It trades about 0.2 of its potential returns per unit of risk. UnitedHealth Group CDR is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 2,699 in UnitedHealth Group CDR on September 1, 2024 and sell it today you would earn a total of 202.00 from holding UnitedHealth Group CDR or generate 7.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Bank of vs. UnitedHealth Group CDR
Performance |
| Timeline |
| National Bank |
| UnitedHealth Group CDR |
National Bank and UnitedHealth Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and UnitedHealth Group
The main advantage of trading using opposite National Bank and UnitedHealth Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank 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.| National Bank vs. Brookfield Investments | National Bank vs. Rubicon Organics | National Bank vs. Arbor Metals Corp | National Bank vs. Goodfood Market Corp |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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