Correlation Between UnitedHealth Group and Elevance Health
Can any of the company-specific risk be diversified away by investing in both UnitedHealth Group and Elevance Health 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 Elevance Health 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 Elevance Health, you can compare the effects of market volatilities on UnitedHealth Group and Elevance Health 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 Elevance Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of UnitedHealth Group and Elevance Health.
Diversification Opportunities for UnitedHealth Group and Elevance Health
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between UnitedHealth and Elevance is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group Incorporate and Elevance Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elevance Health 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 Elevance Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elevance Health has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Elevance Health go up and down completely randomly.
Pair Corralation between UnitedHealth Group and Elevance Health
Considering the 90-day investment horizon UnitedHealth Group Incorporated is expected to generate 1.04 times more return on investment than Elevance Health. However, UnitedHealth Group is 1.04 times more volatile than Elevance Health. It trades about 0.07 of its potential returns per unit of risk. Elevance Health is currently generating about -0.06 per unit of risk. If you would invest 48,785 in UnitedHealth Group Incorporated on August 27, 2024 and sell it today you would earn a total of 10,302 from holding UnitedHealth Group Incorporated or generate 21.12% 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. Elevance Health
Performance |
| Timeline |
| UnitedHealth Group |
| Elevance Health |
UnitedHealth Group and Elevance Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UnitedHealth Group and Elevance Health
The main advantage of trading using opposite UnitedHealth Group and Elevance Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UnitedHealth Group position performs unexpectedly, Elevance Health 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 Elevance Health will offset losses from the drop in Elevance Health's long position.The idea behind UnitedHealth Group Incorporated and Elevance Health pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Elevance Health vs. Cigna Corp | Elevance Health vs. UnitedHealth Group Incorporated | Elevance Health vs. Centene Corp | Elevance Health vs. Molina Healthcare |
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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