Correlation Between Waste Management and UnitedHealth Group
Can any of the company-specific risk be diversified away by investing in both Waste Management 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 Waste Management and UnitedHealth Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and UnitedHealth Group Incorporated, you can compare the effects of market volatilities on Waste Management 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 Waste Management with a short position of UnitedHealth Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and UnitedHealth Group.
Diversification Opportunities for Waste Management and UnitedHealth Group
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Waste and UnitedHealth is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and UnitedHealth Group Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group and Waste Management 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 Waste Management 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 Waste Management i.e., Waste Management and UnitedHealth Group go up and down completely randomly.
Pair Corralation between Waste Management and UnitedHealth Group
Assuming the 90 days trading horizon Waste Management is expected to generate 1.91 times less return on investment than UnitedHealth Group. But when comparing it to its historical volatility, Waste Management is 1.36 times less risky than UnitedHealth Group. It trades about 0.04 of its potential returns per unit of risk. UnitedHealth Group Incorporated is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4,012 in UnitedHealth Group Incorporated on September 26, 2024 and sell it today you would earn a total of 492.00 from holding UnitedHealth Group Incorporated or generate 12.26% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Waste Management vs. UnitedHealth Group Incorporate
Performance |
Timeline |
Waste Management |
UnitedHealth Group |
Waste Management and UnitedHealth Group Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Waste Management and UnitedHealth Group
The main advantage of trading using opposite Waste Management and UnitedHealth Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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.Waste Management vs. Iron Mountain Incorporated | Waste Management vs. Costco Wholesale | Waste Management vs. GP Investments | Waste Management vs. Zoom Video Communications |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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