Correlation Between Major Drilling and UnitedHealth Group

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

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

Diversification Opportunities for Major Drilling and UnitedHealth Group

0.24

Correlation Coefficient

Major Drilling  UnitedHealth Group

Modest diversification

The 3 months correlation between Major and UnitedHealth is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and UnitedHealth Group CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group CDR and Major Drilling 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 Major Drilling Group 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 CDR has no effect on the direction of Major Drilling i.e., Major Drilling and UnitedHealth Group go up and down completely randomly.

Pair Corralation between Major Drilling and UnitedHealth Group

Assuming the 90 days trading horizon Major Drilling Group is expected to generate 0.42 times more return on investment than UnitedHealth Group. However, Major Drilling Group is 2.4 times less risky than UnitedHealth Group. It trades about -0.43 of its potential returns per unit of risk. UnitedHealth Group CDR is currently generating about -0.2 per unit of risk. If you would invest  885.00  in Major Drilling Group on October 8, 2024 and sell it today you would lose (66.00) from holding Major Drilling Group or give up 7.46% of portfolio value over 90 days.

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

Major Drilling Group  vs.  UnitedHealth Group CDR

Major Drilling Group

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Major Drilling Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Major Drilling is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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 latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Major Drilling and UnitedHealth Group

The main advantage of trading using opposite Major Drilling and UnitedHealth Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling 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 Major Drilling Group and UnitedHealth Group CDR 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.

Check out your portfolio center.

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.