Correlation Between UnitedHealth Group and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both UnitedHealth Group and Verizon Communications 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 Verizon Communications 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 Verizon Communications, you can compare the effects of market volatilities on UnitedHealth Group and Verizon Communications 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 Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of UnitedHealth Group and Verizon Communications.
Diversification Opportunities for UnitedHealth Group and Verizon Communications
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between UnitedHealth and Verizon is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group Incorporate and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Verizon Communications go up and down completely randomly.
Pair Corralation between UnitedHealth Group and Verizon Communications
Assuming the 90 days trading horizon UnitedHealth Group Incorporated is expected to generate 1.0 times more return on investment than Verizon Communications. However, UnitedHealth Group is 1.0 times more volatile than Verizon Communications. It trades about 0.05 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.04 per unit of risk. If you would invest 863,265 in UnitedHealth Group Incorporated on August 27, 2024 and sell it today you would earn a total of 349,146 from holding UnitedHealth Group Incorporated or generate 40.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
UnitedHealth Group Incorporate vs. Verizon Communications
Performance |
| Timeline |
| UnitedHealth Group |
| Verizon Communications |
UnitedHealth Group and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UnitedHealth Group and Verizon Communications
The main advantage of trading using opposite UnitedHealth Group and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UnitedHealth Group position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' long position.| UnitedHealth Group vs. The Select Sector | UnitedHealth Group vs. Promotora y Operadora | UnitedHealth Group vs. iShares Global Timber | UnitedHealth Group vs. SPDR Series Trust |
| Verizon Communications vs. The Select Sector | Verizon Communications vs. Promotora y Operadora | Verizon Communications vs. iShares Global Timber | Verizon Communications vs. SPDR Series Trust |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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