Correlation Between Exxon and UnitedHealth Group

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

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

Diversification Opportunities for Exxon and UnitedHealth Group

0.11

Correlation Coefficient

Exxon  UnitedHealth Group

Average diversification

The 3 months correlation between Exxon and UnitedHealth is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding EXXON MOBIL CDR and UnitedHealth Group CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group CDR and Exxon 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 EXXON MOBIL CDR 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 CDR has no effect on the direction of Exxon i.e., Exxon and UnitedHealth Group go up and down completely randomly.

Pair Corralation between Exxon and UnitedHealth Group

Assuming the 90 days trading horizon EXXON MOBIL CDR is expected to generate 0.84 times more return on investment than UnitedHealth Group. However, EXXON MOBIL CDR is 1.19 times less risky than UnitedHealth Group. It trades about 0.05 of its potential returns per unit of risk. UnitedHealth Group CDR is currently generating about 0.01 per unit of risk. If you would invest  2,128  in EXXON MOBIL CDR on September 4, 2024 and sell it today you would earn a total of  75.00  from holding EXXON MOBIL CDR or generate 3.52% return on investment over 90 days.

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

EXXON MOBIL CDR  vs.  UnitedHealth Group CDR

EXXON MOBIL CDR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EXXON MOBIL CDR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Exxon is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

UnitedHealth Group CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UnitedHealth Group CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, UnitedHealth Group is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Exxon and UnitedHealth Group

The main advantage of trading using opposite Exxon and UnitedHealth Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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 EXXON MOBIL CDR and UnitedHealth Group CDR 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.