Correlation Between Seadrill and UNITEDHEALTH

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

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

Diversification Opportunities for Seadrill and UNITEDHEALTH

0.11

Correlation Coefficient

Seadrill  UNITEDHEALTH

Average diversification

The 3 months correlation between Seadrill and UNITEDHEALTH is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited 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 Seadrill 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 Seadrill Limited 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 Seadrill i.e., Seadrill and UNITEDHEALTH go up and down completely randomly.

Pair Corralation between Seadrill and UNITEDHEALTH

Given the investment horizon of 90 days Seadrill is expected to generate 190.26 times less return on investment than UNITEDHEALTH. But when comparing it to its historical volatility, Seadrill Limited is 45.33 times less risky than UNITEDHEALTH. It trades about 0.02 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  8,143  in UNITEDHEALTH GROUP INC on September 26, 2024 and sell it today you would lose (527.00) from holding UNITEDHEALTH GROUP INC or give up 6.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	86.49%
Values	Daily Returns

Seadrill Limited  vs.  UNITEDHEALTH GROUP INC

Seadrill Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seadrill Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

UNITEDHEALTH GROUP INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNITEDHEALTH GROUP INC has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Seadrill and UNITEDHEALTH

The main advantage of trading using opposite Seadrill and UNITEDHEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seadrill 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 Seadrill Limited 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.