Correlation Between LESTE FDO and UnitedHealth Group

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

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

Diversification Opportunities for LESTE FDO and UnitedHealth Group

-0.56

Correlation Coefficient

LESTE FDO  UnitedHealth Group

Excellent diversification

The 3 months correlation between LESTE and UnitedHealth is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding LESTE FDO INV and UnitedHealth Group Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group and LESTE FDO 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 LESTE FDO INV 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 LESTE FDO i.e., LESTE FDO and UnitedHealth Group go up and down completely randomly.

Pair Corralation between LESTE FDO and UnitedHealth Group

Assuming the 90 days trading horizon LESTE FDO INV is expected to under-perform the UnitedHealth Group. But the fund apears to be less risky and, when comparing its historical volatility, LESTE FDO INV is 1.56 times less risky than UnitedHealth Group. The fund trades about -0.15 of its potential returns per unit of risk. The UnitedHealth Group Incorporated is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4,704  in UnitedHealth Group Incorporated on September 13, 2024 and sell it today you would lose (122.00) from holding UnitedHealth Group Incorporated or give up 2.59% of portfolio value over 90 days.

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

LESTE FDO INV  vs.  UnitedHealth Group Incorporate

LESTE FDO INV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LESTE FDO INV has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

UnitedHealth Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UnitedHealth Group Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical indicators, UnitedHealth Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LESTE FDO and UnitedHealth Group

The main advantage of trading using opposite LESTE FDO and UnitedHealth Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LESTE FDO 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 LESTE FDO INV 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.