Correlation Between UnitedHealth Group and Netflix
Can any of the company-specific risk be diversified away by investing in both UnitedHealth Group and Netflix 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 Netflix 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 Netflix, you can compare the effects of market volatilities on UnitedHealth Group and Netflix 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 Netflix. Check out your portfolio center. Please also check ongoing floating volatility patterns of UnitedHealth Group and Netflix.
Diversification Opportunities for UnitedHealth Group and Netflix
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between UnitedHealth and Netflix is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group Incorporate and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix 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 Netflix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netflix has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Netflix go up and down completely randomly.
Pair Corralation between UnitedHealth Group and Netflix
Assuming the 90 days trading horizon UnitedHealth Group is expected to generate 2.05 times less return on investment than Netflix. But when comparing it to its historical volatility, UnitedHealth Group Incorporated is 1.13 times less risky than Netflix. It trades about 0.08 of its potential returns per unit of risk. Netflix is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 4,108 in Netflix on September 1, 2024 and sell it today you would earn a total of 6,542 from holding Netflix or generate 159.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
UnitedHealth Group Incorporate vs. Netflix
Performance |
| Timeline |
| UnitedHealth Group |
| Netflix |
UnitedHealth Group and Netflix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UnitedHealth Group and Netflix
The main advantage of trading using opposite UnitedHealth Group and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UnitedHealth Group position performs unexpectedly, Netflix 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 Netflix will offset losses from the drop in Netflix's long position.| UnitedHealth Group vs. Odontoprev SA | UnitedHealth Group vs. Fras le SA | UnitedHealth Group vs. Western Digital | UnitedHealth Group vs. Energisa SA |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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