Correlation Between SPDR Series and UnitedHealth Group

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

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

Diversification Opportunities for SPDR Series and UnitedHealth Group

0.61

Correlation Coefficient

SPDR Series  UnitedHealth Group

Poor diversification

The 3 months correlation between SPDR and UnitedHealth is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Series Trust and UnitedHealth Group Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group and SPDR Series 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 SPDR Series Trust 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 SPDR Series i.e., SPDR Series and UnitedHealth Group go up and down completely randomly.

Pair Corralation between SPDR Series and UnitedHealth Group

Assuming the 90 days trading horizon SPDR Series is expected to generate 1.38 times less return on investment than UnitedHealth Group. But when comparing it to its historical volatility, SPDR Series Trust is 1.25 times less risky than UnitedHealth Group. It trades about 0.05 of its potential returns per unit of risk. UnitedHealth Group Incorporated is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  825,521  in UnitedHealth Group Incorporated on September 12, 2024 and sell it today you would earn a total of  311,479  from holding UnitedHealth Group Incorporated or generate 37.73% return on investment over 90 days.

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

SPDR Series Trust  vs.  UnitedHealth Group Incorporate

SPDR Series Trust

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Series Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SPDR Series showed solid returns over the last few months and may actually be approaching a breakup point.

UnitedHealth Group

Risk-Adjusted Performance

0 of 100

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 fairly strong technical indicators, UnitedHealth Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR Series and UnitedHealth Group

The main advantage of trading using opposite SPDR Series and UnitedHealth Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Series 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 SPDR Series Trust 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.