Correlation Between Morgan Stanley and UNITEDHEALTH

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

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

Diversification Opportunities for Morgan Stanley and UNITEDHEALTH

-0.58

Correlation Coefficient

Morgan Stanley  UNITEDHEALTH

Excellent diversification

The 3 months correlation between Morgan and UNITEDHEALTH is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct 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 Morgan Stanley 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 Morgan Stanley Direct 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 Morgan Stanley i.e., Morgan Stanley and UNITEDHEALTH go up and down completely randomly.

Pair Corralation between Morgan Stanley and UNITEDHEALTH

Given the investment horizon of 90 days Morgan Stanley is expected to generate 287.93 times less return on investment than UNITEDHEALTH. But when comparing it to its historical volatility, Morgan Stanley Direct is 73.21 times less risky than UNITEDHEALTH. It trades about 0.03 of its potential returns per unit of risk. UNITEDHEALTH GROUP INC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7,822  in UNITEDHEALTH GROUP INC on December 6, 2024 and sell it today you would earn a total of  10.00  from holding UNITEDHEALTH GROUP INC or generate 0.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	70.99%
Values	Daily Returns

Morgan Stanley Direct  vs.  UNITEDHEALTH GROUP INC

Morgan Stanley Direct

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morgan Stanley Direct has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Morgan Stanley is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

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 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, UNITEDHEALTH is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Morgan Stanley and UNITEDHEALTH

The main advantage of trading using opposite Morgan Stanley and UNITEDHEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley 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 Morgan Stanley Direct 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.