Correlation Between UnitedHealth Group and Sumitomo Mitsui

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Can any of the company-specific risk be diversified away by investing in both UnitedHealth Group and Sumitomo Mitsui 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 Sumitomo Mitsui 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 Sumitomo Mitsui Financial, you can compare the effects of market volatilities on UnitedHealth Group and Sumitomo Mitsui 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 Sumitomo Mitsui. Check out your portfolio center. Please also check ongoing floating volatility patterns of UnitedHealth Group and Sumitomo Mitsui.

Diversification Opportunities for UnitedHealth Group and Sumitomo Mitsui

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between UnitedHealth and Sumitomo is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group Incorporate and Sumitomo Mitsui Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Financial 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 Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Financial has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between UnitedHealth Group and Sumitomo Mitsui

Assuming the 90 days trading horizon UnitedHealth Group is expected to generate 17.26 times less return on investment than Sumitomo Mitsui. In addition to that, UnitedHealth Group is 1.19 times more volatile than Sumitomo Mitsui Financial. It trades about 0.01 of its total potential returns per unit of risk. Sumitomo Mitsui Financial is currently generating about 0.23 per unit of volatility. If you would invest  6,881  in Sumitomo Mitsui Financial on September 20, 2024 and sell it today you would earn a total of  2,146  from holding Sumitomo Mitsui Financial or generate 31.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.16%
ValuesDaily Returns

UnitedHealth Group Incorporate  vs.  Sumitomo Mitsui Financial

 Performance 
       Timeline  
UnitedHealth Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 newest stock price disturbance, may contribute to short-term losses for the investors.
Sumitomo Mitsui Financial 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Financial are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Sumitomo Mitsui sustained solid returns over the last few months and may actually be approaching a breakup point.

UnitedHealth Group and Sumitomo Mitsui Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with UnitedHealth Group and Sumitomo Mitsui

The main advantage of trading using opposite UnitedHealth Group and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UnitedHealth Group position performs unexpectedly, Sumitomo Mitsui 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 Sumitomo Mitsui will offset losses from the drop in Sumitomo Mitsui's long position.
The idea behind UnitedHealth Group Incorporated and Sumitomo Mitsui Financial 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 Commodity Directory module to find actively traded commodities issued by global exchanges.

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