Correlation Between UnitedHealth Group and Microsoft

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

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

Diversification Opportunities for UnitedHealth Group and Microsoft

-0.06

Correlation Coefficient

UnitedHealth Group  Microsoft

Good diversification

The 3 months correlation between UnitedHealth and Microsoft is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group Incorporate and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and UnitedHealth Group 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 UnitedHealth Group Incorporated are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Microsoft go up and down completely randomly.

Pair Corralation between UnitedHealth Group and Microsoft

Assuming the 90 days trading horizon UnitedHealth Group is expected to generate 6.55 times less return on investment than Microsoft. In addition to that, UnitedHealth Group is 1.24 times more volatile than Microsoft. It trades about 0.01 of its total potential returns per unit of risk. Microsoft is currently generating about 0.1 per unit of volatility. If you would invest  457,892  in Microsoft on September 20, 2024 and sell it today you would earn a total of  437,751  from holding Microsoft or generate 95.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

UnitedHealth Group Incorporate  vs.  Microsoft

UnitedHealth Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UnitedHealth Group Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Microsoft

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with UnitedHealth Group and Microsoft

The main advantage of trading using opposite UnitedHealth Group and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UnitedHealth Group position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.

The idea behind UnitedHealth Group Incorporated and Microsoft 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.