Correlation Between UnitedHealth Group and Bristol Myers

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

Diversification Opportunities for UnitedHealth Group and Bristol Myers

0.5

Correlation Coefficient

UnitedHealth Group  Bristol Myers

Very weak diversification

The 3 months correlation between UnitedHealth and Bristol is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group Incorporate and Bristol Myers Squibb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bristol Myers Squibb 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 Bristol Myers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bristol Myers Squibb has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Bristol Myers go up and down completely randomly.

Pair Corralation between UnitedHealth Group and Bristol Myers

Assuming the 90 days trading horizon UnitedHealth Group Incorporated is expected to generate 0.65 times more return on investment than Bristol Myers. However, UnitedHealth Group Incorporated is 1.53 times less risky than Bristol Myers. It trades about 0.03 of its potential returns per unit of risk. Bristol Myers Squibb is currently generating about 0.01 per unit of risk. If you would invest  3,805  in UnitedHealth Group Incorporated on September 25, 2024 and sell it today you would earn a total of  699.00  from holding UnitedHealth Group Incorporated or generate 18.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	86.6%
Values	Daily Returns

UnitedHealth Group Incorporate  vs.  Bristol Myers Squibb

UnitedHealth Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UnitedHealth Group Incorporated are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, UnitedHealth Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bristol Myers Squibb

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bristol Myers sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UnitedHealth Group and Bristol Myers

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

The idea behind UnitedHealth Group Incorporated and Bristol Myers Squibb 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..