Correlation Between UNITEDHEALTH and NL Industries

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

By analyzing existing cross correlation between UNITEDHEALTH GROUP INC and NL Industries, you can compare the effects of market volatilities on UNITEDHEALTH and NL Industries 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 with a short position of NL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITEDHEALTH and NL Industries.

Diversification Opportunities for UNITEDHEALTH and NL Industries

-0.17

Correlation Coefficient

UNITEDHEALTH  NL Industries

Good diversification

The 3 months correlation between UNITEDHEALTH and NL Industries is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding UNITEDHEALTH GROUP INC and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries and UNITEDHEALTH 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 INC are associated (or correlated) with NL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NL Industries has no effect on the direction of UNITEDHEALTH i.e., UNITEDHEALTH and NL Industries go up and down completely randomly.

Pair Corralation between UNITEDHEALTH and NL Industries

Assuming the 90 days trading horizon UNITEDHEALTH GROUP INC is expected to generate 0.09 times more return on investment than NL Industries. However, UNITEDHEALTH GROUP INC is 10.87 times less risky than NL Industries. It trades about 0.0 of its potential returns per unit of risk. NL Industries is currently generating about -0.09 per unit of risk. If you would invest  9,837  in UNITEDHEALTH GROUP INC on December 6, 2024 and sell it today you would earn a total of  4.00  from holding UNITEDHEALTH GROUP INC or generate 0.04% return on investment over 90 days.

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

UNITEDHEALTH GROUP INC  vs.  NL Industries

UNITEDHEALTH GROUP INC

Risk-Adjusted Performance

Weak

Over the last 90 days UNITEDHEALTH GROUP INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, UNITEDHEALTH is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

NL Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days NL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with UNITEDHEALTH and NL Industries

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

The idea behind UNITEDHEALTH GROUP INC and NL Industries 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.