Correlation Between UnitedHealth Group and Anthem
Can any of the company-specific risk be diversified away by investing in both UnitedHealth Group and Anthem 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 Anthem 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 Anthem Inc, you can compare the effects of market volatilities on UnitedHealth Group and Anthem 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 Anthem. Check out your portfolio center. Please also check ongoing floating volatility patterns of UnitedHealth Group and Anthem.
Diversification Opportunities for UnitedHealth Group and Anthem
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between UnitedHealth and Anthem is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group Incorporate and Anthem Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anthem Inc 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 Anthem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anthem Inc has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Anthem go up and down completely randomly.
Pair Corralation between UnitedHealth Group and Anthem
Assuming the 90 days trading horizon UnitedHealth Group Incorporated is expected to generate 1.25 times more return on investment than Anthem. However, UnitedHealth Group is 1.25 times more volatile than Anthem Inc. It trades about 0.19 of its potential returns per unit of risk. Anthem Inc is currently generating about 0.16 per unit of risk. If you would invest 49,790 in UnitedHealth Group Incorporated on November 6, 2024 and sell it today you would earn a total of 3,590 from holding UnitedHealth Group Incorporated or generate 7.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
UnitedHealth Group Incorporate vs. Anthem Inc
Performance |
| Timeline |
| UnitedHealth Group |
| Anthem Inc |
UnitedHealth Group and Anthem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UnitedHealth Group and Anthem
The main advantage of trading using opposite UnitedHealth Group and Anthem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UnitedHealth Group position performs unexpectedly, Anthem 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 Anthem will offset losses from the drop in Anthem's long position.| UnitedHealth Group vs. STMICROELECTRONICS | UnitedHealth Group vs. Renesas Electronics | UnitedHealth Group vs. TT Electronics PLC | UnitedHealth Group vs. Methode Electronics |
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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