Correlation Between UnitedHealth Group and Bread Financial
Can any of the company-specific risk be diversified away by investing in both UnitedHealth Group and Bread 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 Bread Financial 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 Bread Financial Holdings, you can compare the effects of market volatilities on UnitedHealth Group and Bread 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 Bread Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of UnitedHealth Group and Bread Financial.
Diversification Opportunities for UnitedHealth Group and Bread Financial
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between UnitedHealth and Bread is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group Incorporate and Bread Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bread Financial Holdings 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 Bread Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bread Financial Holdings has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Bread Financial go up and down completely randomly.
Pair Corralation between UnitedHealth Group and Bread Financial
Assuming the 90 days trading horizon UnitedHealth Group is expected to generate 1.19 times less return on investment than Bread Financial. But when comparing it to its historical volatility, UnitedHealth Group Incorporated is 2.18 times less risky than Bread Financial. It trades about 0.28 of its potential returns per unit of risk. Bread Financial Holdings is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 7,438 in Bread Financial Holdings on August 31, 2024 and sell it today you would earn a total of 1,011 from holding Bread Financial Holdings or generate 13.59% 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. Bread Financial Holdings
Performance |
| Timeline |
| UnitedHealth Group |
| Bread Financial Holdings |
UnitedHealth Group and Bread Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UnitedHealth Group and Bread Financial
The main advantage of trading using opposite UnitedHealth Group and Bread Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UnitedHealth Group position performs unexpectedly, Bread 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 Bread Financial will offset losses from the drop in Bread Financial's long position.| UnitedHealth Group vs. Odontoprev SA | UnitedHealth Group vs. Fras le SA | UnitedHealth Group vs. Western Digital | UnitedHealth Group vs. Energisa SA |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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