Correlation Between Walmart and UnitedHealth Group

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

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

Diversification Opportunities for Walmart and UnitedHealth Group

0.27

Correlation Coefficient

Walmart  UnitedHealth Group

Modest diversification

The 3 months correlation between Walmart and UnitedHealth is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and UnitedHealth Group Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group and Walmart 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 Walmart 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 Walmart i.e., Walmart and UnitedHealth Group go up and down completely randomly.

Pair Corralation between Walmart and UnitedHealth Group

Assuming the 90 days trading horizon Walmart is expected to generate 0.76 times more return on investment than UnitedHealth Group. However, Walmart is 1.31 times less risky than UnitedHealth Group. It trades about 0.2 of its potential returns per unit of risk. UnitedHealth Group Incorporated is currently generating about 0.05 per unit of risk. If you would invest  2,361  in Walmart on September 26, 2024 and sell it today you would earn a total of  1,145  from holding Walmart or generate 48.5% return on investment over 90 days.

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

Walmart  vs.  UnitedHealth Group Incorporate

Walmart

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Walmart sustained solid returns over the last few months and may actually be approaching a breakup point.

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walmart and UnitedHealth Group

The main advantage of trading using opposite Walmart and UnitedHealth Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart 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 Walmart 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.