Correlation Between Chevron Corp and UNITEDHEALTH

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

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

Diversification Opportunities for Chevron Corp and UNITEDHEALTH

-0.55

Correlation Coefficient

Chevron Corp  UNITEDHEALTH

Excellent diversification

The 3 months correlation between Chevron and UNITEDHEALTH is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp 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 Chevron Corp 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 Chevron Corp 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 Chevron Corp i.e., Chevron Corp and UNITEDHEALTH go up and down completely randomly.

Pair Corralation between Chevron Corp and UNITEDHEALTH

Considering the 90-day investment horizon Chevron Corp is expected to under-perform the UNITEDHEALTH. But the stock apears to be less risky and, when comparing its historical volatility, Chevron Corp is 5.67 times less risky than UNITEDHEALTH. The stock trades about -0.31 of its potential returns per unit of risk. The UNITEDHEALTH GROUP INC is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  6,244  in UNITEDHEALTH GROUP INC on September 18, 2024 and sell it today you would earn a total of  1,718  from holding UNITEDHEALTH GROUP INC or generate 27.51% return on investment over 90 days.

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

Chevron Corp  vs.  UNITEDHEALTH GROUP INC

Chevron Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Chevron Corp is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

UNITEDHEALTH GROUP INC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UNITEDHEALTH GROUP INC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, UNITEDHEALTH sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chevron Corp and UNITEDHEALTH

The main advantage of trading using opposite Chevron Corp and UNITEDHEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp 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 Chevron Corp 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.