Correlation Between Microsoft Corp and UnitedHealth Group

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

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

Diversification Opportunities for Microsoft Corp and UnitedHealth Group

0.26

Correlation Coefficient

Microsoft Corp  UnitedHealth Group

Modest diversification

The 3 months correlation between Microsoft and UnitedHealth is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR 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 Microsoft 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 Microsoft Corp CDR 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 Microsoft Corp i.e., Microsoft Corp and UnitedHealth Group go up and down completely randomly.

Pair Corralation between Microsoft Corp and UnitedHealth Group

Assuming the 90 days trading horizon Microsoft Corp CDR is expected to generate 0.61 times more return on investment than UnitedHealth Group. However, Microsoft Corp CDR is 1.64 times less risky than UnitedHealth Group. It trades about -0.09 of its potential returns per unit of risk. UnitedHealth Group CDR is currently generating about -0.16 per unit of risk. If you would invest  3,140  in Microsoft Corp CDR on December 1, 2024 and sell it today you would lose (256.00) from holding Microsoft Corp CDR or give up 8.15% of portfolio value over 90 days.

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

Microsoft Corp CDR  vs.  UnitedHealth Group CDR

Microsoft Corp CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft Corp CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

UnitedHealth Group CDR

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Microsoft Corp and UnitedHealth Group

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

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.