Correlation Between Sumitomo Mitsui and UnitedHealth Group
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and UnitedHealth Group 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 Sumitomo Mitsui and UnitedHealth Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Mitsui Financial and UnitedHealth Group Incorporated, you can compare the effects of market volatilities on Sumitomo Mitsui and UnitedHealth Group 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 Sumitomo Mitsui with a short position of UnitedHealth Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and UnitedHealth Group.
Diversification Opportunities for Sumitomo Mitsui and UnitedHealth Group
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sumitomo and UnitedHealth is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and UnitedHealth Group Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group and Sumitomo Mitsui 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 Sumitomo Mitsui Financial are associated (or correlated) with UnitedHealth Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UnitedHealth Group has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and UnitedHealth Group go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and UnitedHealth Group
Assuming the 90 days trading horizon Sumitomo Mitsui Financial is expected to under-perform the UnitedHealth Group. But the stock apears to be less risky and, when comparing its historical volatility, Sumitomo Mitsui Financial is 3.78 times less risky than UnitedHealth Group. The stock trades about -0.12 of its potential returns per unit of risk. The UnitedHealth Group Incorporated is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 3,310 in UnitedHealth Group Incorporated on February 3, 2024 and sell it today you would earn a total of 275.00 from holding UnitedHealth Group Incorporated or generate 8.31% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Sumitomo Mitsui Financial vs. UnitedHealth Group Incorporate
Performance |
Timeline |
Sumitomo Mitsui Financial |
UnitedHealth Group |
Sumitomo Mitsui and UnitedHealth Group Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Sumitomo Mitsui and UnitedHealth Group
The main advantage of trading using opposite Sumitomo Mitsui and UnitedHealth Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, UnitedHealth Group 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 UnitedHealth Group will offset losses from the drop in UnitedHealth Group's long position.The idea behind Sumitomo Mitsui Financial and UnitedHealth Group Incorporated 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.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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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