Correlation Between UnitedHealth Group and Capital One

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

Diversification Opportunities for UnitedHealth Group and Capital One

0.69

Correlation Coefficient

UnitedHealth Group  Capital One

Poor diversification

The 3 months correlation between UnitedHealth and Capital is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group Incorporate and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial 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 Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Capital One go up and down completely randomly.

Pair Corralation between UnitedHealth Group and Capital One

Assuming the 90 days trading horizon UnitedHealth Group Incorporated is expected to under-perform the Capital One. In addition to that, UnitedHealth Group is 1.65 times more volatile than Capital One Financial. It trades about -0.1 of its total potential returns per unit of risk. Capital One Financial is currently generating about 0.16 per unit of volatility. If you would invest  53,904  in Capital One Financial on September 17, 2024 and sell it today you would earn a total of  2,868  from holding Capital One Financial or generate 5.32% return on investment over 90 days.

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

UnitedHealth Group Incorporate  vs.  Capital One Financial

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. 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.

Capital One Financial

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Capital One sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UnitedHealth Group and Capital One

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

The idea behind UnitedHealth Group Incorporated and Capital One Financial 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.