Correlation Between UnitedHealth Group and Brookfield

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

By analyzing existing cross correlation between UnitedHealth Group CDR and Brookfield, you can compare the effects of market volatilities on UnitedHealth Group and Brookfield 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 Brookfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of UnitedHealth Group and Brookfield.

Diversification Opportunities for UnitedHealth Group and Brookfield

0.31

Correlation Coefficient

UnitedHealth Group  Brookfield

Weak diversification

The 3 months correlation between UnitedHealth and Brookfield is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group CDR and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield 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 CDR are associated (or correlated) with Brookfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Brookfield go up and down completely randomly.

Pair Corralation between UnitedHealth Group and Brookfield

Assuming the 90 days trading horizon UnitedHealth Group is expected to generate 2.06 times less return on investment than Brookfield. In addition to that, UnitedHealth Group is 2.33 times more volatile than Brookfield. It trades about 0.02 of its total potential returns per unit of risk. Brookfield is currently generating about 0.11 per unit of volatility. If you would invest  2,282  in Brookfield on September 2, 2024 and sell it today you would earn a total of  108.00  from holding Brookfield or generate 4.73% return on investment over 90 days.

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

UnitedHealth Group CDR  vs.  Brookfield

UnitedHealth Group CDR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UnitedHealth Group CDR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, UnitedHealth Group is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Brookfield

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Brookfield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with UnitedHealth Group and Brookfield

The main advantage of trading using opposite UnitedHealth Group and Brookfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UnitedHealth Group position performs unexpectedly, Brookfield 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 Brookfield will offset losses from the drop in Brookfield's long position.

The idea behind UnitedHealth Group CDR and Brookfield 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.