Correlation Between Vanguard World and UnitedHealth Group

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

By analyzing existing cross correlation between Vanguard World and UnitedHealth Group Incorporated, you can compare the effects of market volatilities on Vanguard World and UnitedHealth Group 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 Vanguard World with a short position of UnitedHealth Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard World and UnitedHealth Group.

Diversification Opportunities for Vanguard World and UnitedHealth Group

0.35

Correlation Coefficient

Vanguard World  UnitedHealth Group

Weak diversification

The 3 months correlation between Vanguard and UnitedHealth is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard World and UnitedHealth Group Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group and Vanguard World 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 Vanguard World are associated (or correlated) with UnitedHealth Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UnitedHealth Group has no effect on the direction of Vanguard World i.e., Vanguard World and UnitedHealth Group go up and down completely randomly.

Pair Corralation between Vanguard World and UnitedHealth Group

Assuming the 90 days trading horizon Vanguard World is expected to generate 0.47 times more return on investment than UnitedHealth Group. However, Vanguard World is 2.12 times less risky than UnitedHealth Group. It trades about 0.07 of its potential returns per unit of risk. UnitedHealth Group Incorporated is currently generating about 0.02 per unit of risk. If you would invest  409,998  in Vanguard World on December 2, 2024 and sell it today you would earn a total of  139,706  from holding Vanguard World or generate 34.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Vanguard World  vs.  UnitedHealth Group Incorporate

Vanguard World

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard World has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Vanguard World is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

UnitedHealth Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days UnitedHealth Group Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Vanguard World and UnitedHealth Group

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

The idea behind Vanguard World and UnitedHealth Group Incorporated 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.