Correlation Between UnitedHealth Group and Fairfax Financial
Can any of the company-specific risk be diversified away by investing in both UnitedHealth Group and Fairfax Financial 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 Fairfax Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UnitedHealth Group CDR and Fairfax Financial Holdings, you can compare the effects of market volatilities on UnitedHealth Group and Fairfax Financial 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 Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of UnitedHealth Group and Fairfax Financial.
Diversification Opportunities for UnitedHealth Group and Fairfax Financial
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between UnitedHealth and Fairfax is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group CDR and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial 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 CDR are associated (or correlated) with Fairfax Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairfax Financial has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Fairfax Financial go up and down completely randomly.
Pair Corralation between UnitedHealth Group and Fairfax Financial
Assuming the 90 days trading horizon UnitedHealth Group is expected to generate 4.28 times less return on investment than Fairfax Financial. In addition to that, UnitedHealth Group is 1.05 times more volatile than Fairfax Financial Holdings. It trades about 0.06 of its total potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.25 per unit of volatility. If you would invest 1,811 in Fairfax Financial Holdings on August 30, 2024 and sell it today you would earn a total of 367.00 from holding Fairfax Financial Holdings or generate 20.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
UnitedHealth Group CDR vs. Fairfax Financial Holdings
Performance |
| Timeline |
| UnitedHealth Group CDR |
| Fairfax Financial |
UnitedHealth Group and Fairfax Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UnitedHealth Group and Fairfax Financial
The main advantage of trading using opposite UnitedHealth Group and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UnitedHealth Group position performs unexpectedly, Fairfax Financial 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 Fairfax Financial will offset losses from the drop in Fairfax Financial's long position.| UnitedHealth Group vs. Highwood Asset Management | UnitedHealth Group vs. Rubicon Organics | UnitedHealth Group vs. Stampede Drilling | UnitedHealth Group vs. Orbit Garant Drilling |
| Fairfax Financial vs. Walmart Inc CDR | Fairfax Financial vs. Amazon CDR | Fairfax Financial vs. Berkshire Hathaway CDR | Fairfax Financial vs. UnitedHealth Group CDR |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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