Correlation Between NL Industries and UNITEDHEALTH

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

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

Diversification Opportunities for NL Industries and UNITEDHEALTH

-0.19

Correlation Coefficient

NL Industries  UNITEDHEALTH

Good diversification

The 3 months correlation between NL Industries and UNITEDHEALTH is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries 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 NL Industries 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 NL Industries 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 NL Industries i.e., NL Industries and UNITEDHEALTH go up and down completely randomly.

Pair Corralation between NL Industries and UNITEDHEALTH

Allowing for the 90-day total investment horizon NL Industries is expected to under-perform the UNITEDHEALTH. In addition to that, NL Industries is 22.16 times more volatile than UNITEDHEALTH GROUP INC. It trades about -0.17 of its total potential returns per unit of risk. UNITEDHEALTH GROUP INC is currently generating about 0.06 per unit of volatility. If you would invest  9,831  in UNITEDHEALTH GROUP INC on December 5, 2024 and sell it today you would earn a total of  10.00  from holding UNITEDHEALTH GROUP INC or generate 0.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

NL Industries  vs.  UNITEDHEALTH GROUP INC

NL Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days NL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NL Industries and UNITEDHEALTH

The main advantage of trading using opposite NL Industries and UNITEDHEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries 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 NL Industries 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.