Correlation Between Disney and UnitedHealth Group

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

By analyzing existing cross correlation between The Walt Disney and UnitedHealth Group Incorporated, you can compare the effects of market volatilities on Disney and UnitedHealth Group 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 Disney with a short position of UnitedHealth Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and UnitedHealth Group.

Diversification Opportunities for Disney and UnitedHealth Group

0.1

Correlation Coefficient

Disney  UnitedHealth Group

Average diversification

The 3 months correlation between Disney and UnitedHealth is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding The Walt Disney and UnitedHealth Group Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group and Disney 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 The Walt Disney are associated (or correlated) with UnitedHealth Group. 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 has no effect on the direction of Disney i.e., Disney and UnitedHealth Group go up and down completely randomly.

Pair Corralation between Disney and UnitedHealth Group

Assuming the 90 days trading horizon The Walt Disney is expected to generate 0.51 times more return on investment than UnitedHealth Group. However, The Walt Disney is 1.97 times less risky than UnitedHealth Group. It trades about 0.01 of its potential returns per unit of risk. UnitedHealth Group Incorporated is currently generating about -0.05 per unit of risk. If you would invest  223,807  in The Walt Disney on November 19, 2024 and sell it today you would earn a total of  69.00  from holding The Walt Disney or generate 0.03% return on investment over 90 days.

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

The Walt Disney  vs.  UnitedHealth Group Incorporate

Walt Disney

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Walt Disney has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Disney is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

UnitedHealth Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days UnitedHealth Group Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Disney and UnitedHealth Group

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

The idea behind The Walt Disney and UnitedHealth Group Incorporated 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.