Correlation Between Ensign and UnitedHealth Group

Can any of the company-specific risk be diversified away by investing in both Ensign 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 Ensign and UnitedHealth Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Ensign Group and UnitedHealth Group Incorporated, you can compare the effects of market volatilities on Ensign 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 Ensign with a short position of UnitedHealth Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ensign and UnitedHealth Group.

Diversification Opportunities for Ensign and UnitedHealth Group

-0.42

Correlation Coefficient

Ensign  UnitedHealth Group

Very good diversification

The 3 months correlation between Ensign and UnitedHealth is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding The Ensign Group and UnitedHealth Group Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group and Ensign 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 The Ensign Group 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 Ensign i.e., Ensign and UnitedHealth Group go up and down completely randomly.

Pair Corralation between Ensign and UnitedHealth Group

Given the investment horizon of 90 days The Ensign Group is expected to under-perform the UnitedHealth Group. But the stock apears to be less risky and, when comparing its historical volatility, The Ensign Group is 1.14 times less risky than UnitedHealth Group. The stock trades about -0.01 of its potential returns per unit of risk. The UnitedHealth Group Incorporated is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  59,656  in UnitedHealth Group Incorporated on September 1, 2024 and sell it today you would earn a total of  1,364  from holding UnitedHealth Group Incorporated or generate 2.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

The Ensign Group  vs.  UnitedHealth Group Incorporate

Ensign Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Ensign Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ensign is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

UnitedHealth Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UnitedHealth Group Incorporated are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, UnitedHealth Group is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Ensign and UnitedHealth Group

The main advantage of trading using opposite Ensign and UnitedHealth Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ensign 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 The Ensign Group 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.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.