Correlation Between Bank of America and UNITEDHEALTH

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

By analyzing existing cross correlation between Bank of America and UNITEDHEALTH GROUP INC, you can compare the effects of market volatilities on Bank of America and UNITEDHEALTH 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 Bank of America with a short position of UNITEDHEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and UNITEDHEALTH.

Diversification Opportunities for Bank of America and UNITEDHEALTH

-0.22

Correlation Coefficient

Bank of America  UNITEDHEALTH

Very good diversification

The 3 months correlation between Bank and UNITEDHEALTH is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and UNITEDHEALTH GROUP INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITEDHEALTH GROUP INC and Bank of America 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 Bank of America are associated (or correlated) with UNITEDHEALTH. 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 INC has no effect on the direction of Bank of America i.e., Bank of America and UNITEDHEALTH go up and down completely randomly.

Pair Corralation between Bank of America and UNITEDHEALTH

Considering the 90-day investment horizon Bank of America is expected to under-perform the UNITEDHEALTH. In addition to that, Bank of America is 1.42 times more volatile than UNITEDHEALTH GROUP INC. It trades about -0.02 of its total potential returns per unit of risk. UNITEDHEALTH GROUP INC is currently generating about 0.12 per unit of volatility. If you would invest  8,862  in UNITEDHEALTH GROUP INC on December 26, 2024 and sell it today you would earn a total of  732.00  from holding UNITEDHEALTH GROUP INC or generate 8.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Bank of America  vs.  UNITEDHEALTH GROUP INC

Bank of America

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank of America has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Bank of America is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

UNITEDHEALTH GROUP INC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UNITEDHEALTH GROUP INC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, UNITEDHEALTH may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bank of America and UNITEDHEALTH

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

The idea behind Bank of America and UNITEDHEALTH GROUP INC 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.