Correlation Between UnitedHealth Group and Stampede Drilling

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

Diversification Opportunities for UnitedHealth Group and Stampede Drilling

0.55

Correlation Coefficient

UnitedHealth Group  Stampede Drilling

Very weak diversification

The 3 months correlation between UnitedHealth and Stampede is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group CDR and Stampede Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stampede Drilling 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 Stampede Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stampede Drilling has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Stampede Drilling go up and down completely randomly.

Pair Corralation between UnitedHealth Group and Stampede Drilling

Assuming the 90 days trading horizon UnitedHealth Group CDR is expected to generate 0.71 times more return on investment than Stampede Drilling. However, UnitedHealth Group CDR is 1.4 times less risky than Stampede Drilling. It trades about -0.07 of its potential returns per unit of risk. Stampede Drilling is currently generating about -0.06 per unit of risk. If you would invest  2,722  in UnitedHealth Group CDR on October 21, 2024 and sell it today you would lose (297.00) from holding UnitedHealth Group CDR or give up 10.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

UnitedHealth Group CDR  vs.  Stampede Drilling

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 abnormal 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.

Stampede Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stampede Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with UnitedHealth Group and Stampede Drilling

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

The idea behind UnitedHealth Group CDR and Stampede Drilling 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.