Correlation Between UnitedHealth Group and Major Drilling

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

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

Diversification Opportunities for UnitedHealth Group and Major Drilling

0.24

Correlation Coefficient

UnitedHealth Group  Major Drilling

Modest diversification

The 3 months correlation between UnitedHealth and Major is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group CDR and Major Drilling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Major Drilling Group 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 CDR are associated (or correlated) with Major Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Major Drilling Group has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Major Drilling go up and down completely randomly.

Pair Corralation between UnitedHealth Group and Major Drilling

Assuming the 90 days trading horizon UnitedHealth Group CDR is expected to under-perform the Major Drilling. In addition to that, UnitedHealth Group is 1.15 times more volatile than Major Drilling Group. It trades about -0.08 of its total potential returns per unit of risk. Major Drilling Group is currently generating about 0.01 per unit of volatility. If you would invest  815.00  in Major Drilling Group on October 8, 2024 and sell it today you would earn a total of  4.00  from holding Major Drilling Group or generate 0.49% return on investment over 90 days.

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

UnitedHealth Group CDR  vs.  Major Drilling Group

UnitedHealth Group CDR

Risk-Adjusted Performance

0 of 100

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 latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Major Drilling Group

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Major Drilling Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Major Drilling is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with UnitedHealth Group and Major Drilling

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

The idea behind UnitedHealth Group CDR and Major Drilling Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.