Correlation Between UnitedHealth Group and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both UnitedHealth Group and Southwest Airlines 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 Group and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UnitedHealth Group Incorporated and Southwest Airlines Co, you can compare the effects of market volatilities on UnitedHealth Group and Southwest Airlines 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 Group with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of UnitedHealth Group and Southwest Airlines.
Diversification Opportunities for UnitedHealth Group and Southwest Airlines
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between UnitedHealth and Southwest is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group Incorporate and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and UnitedHealth Group 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 Incorporated are associated (or correlated) with Southwest Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Airlines has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Southwest Airlines go up and down completely randomly.
Pair Corralation between UnitedHealth Group and Southwest Airlines
Assuming the 90 days horizon UnitedHealth Group Incorporated is expected to under-perform the Southwest Airlines. In addition to that, UnitedHealth Group is 1.7 times more volatile than Southwest Airlines Co. It trades about -0.12 of its total potential returns per unit of risk. Southwest Airlines Co is currently generating about 0.01 per unit of volatility. If you would invest 3,038 in Southwest Airlines Co on October 29, 2024 and sell it today you would earn a total of 7.00 from holding Southwest Airlines Co or generate 0.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
UnitedHealth Group Incorporate vs. Southwest Airlines Co
Performance |
| Timeline |
| UnitedHealth Group |
| Southwest Airlines |
UnitedHealth Group and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UnitedHealth Group and Southwest Airlines
The main advantage of trading using opposite UnitedHealth Group and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UnitedHealth Group position performs unexpectedly, Southwest Airlines 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 Southwest Airlines will offset losses from the drop in Southwest Airlines' long position.| UnitedHealth Group vs. Southwest Airlines Co | UnitedHealth Group vs. American Airlines Group | UnitedHealth Group vs. Ameriprise Financial | UnitedHealth Group vs. China Eastern Airlines |
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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