Correlation Between UnitedHealth Group and Canadian Imperial

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

Diversification Opportunities for UnitedHealth Group and Canadian Imperial

-0.73

Correlation Coefficient

UnitedHealth Group  Canadian Imperial

Pay attention - limited upside

The 3 months correlation between UnitedHealth and Canadian is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group CDR and Canadian Imperial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Imperial Bank 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 Canadian Imperial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Imperial Bank has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Canadian Imperial go up and down completely randomly.

Pair Corralation between UnitedHealth Group and Canadian Imperial

Assuming the 90 days trading horizon UnitedHealth Group CDR is expected to generate 2.31 times more return on investment than Canadian Imperial. However, UnitedHealth Group is 2.31 times more volatile than Canadian Imperial Bank. It trades about 0.2 of its potential returns per unit of risk. Canadian Imperial Bank is currently generating about -0.13 per unit of risk. If you would invest  2,195  in UnitedHealth Group CDR on February 4, 2024 and sell it today you would earn a total of  171.00  from holding UnitedHealth Group CDR or generate 7.79% return on investment over 90 days.

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

UnitedHealth Group CDR  vs.  Canadian Imperial Bank

UnitedHealth Group CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UnitedHealth Group CDR has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Canadian Imperial Bank

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Canadian Imperial may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with UnitedHealth Group and Canadian Imperial

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

The idea behind UnitedHealth Group CDR and Canadian Imperial Bank 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.