Correlation Between UnitedHealth Group and Starbucks CDR

Can any of the company-specific risk be diversified away by investing in both UnitedHealth Group and Starbucks CDR 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 Starbucks CDR 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 Starbucks CDR, you can compare the effects of market volatilities on UnitedHealth Group and Starbucks CDR 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 Starbucks CDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of UnitedHealth Group and Starbucks CDR.

Diversification Opportunities for UnitedHealth Group and Starbucks CDR

0.78

Correlation Coefficient

UnitedHealth Group  Starbucks CDR

Poor diversification

The 3 months correlation between UnitedHealth and Starbucks is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group CDR and Starbucks CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks CDR 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 Starbucks CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks CDR has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Starbucks CDR go up and down completely randomly.

Pair Corralation between UnitedHealth Group and Starbucks CDR

Assuming the 90 days trading horizon UnitedHealth Group CDR is expected to under-perform the Starbucks CDR. In addition to that, UnitedHealth Group is 1.62 times more volatile than Starbucks CDR. It trades about -0.04 of its total potential returns per unit of risk. Starbucks CDR is currently generating about -0.03 per unit of volatility. If you would invest  2,782  in Starbucks CDR on October 23, 2024 and sell it today you would lose (82.00) from holding Starbucks CDR or give up 2.95% of portfolio value over 90 days.

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

UnitedHealth Group CDR  vs.  Starbucks CDR

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 very healthy basic indicators, UnitedHealth Group is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Starbucks CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Starbucks CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Starbucks CDR is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with UnitedHealth Group and Starbucks CDR

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

The idea behind UnitedHealth Group CDR and Starbucks 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.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..