Correlation Between Microsoft Corp and UnitedHealth Group
Can any of the company-specific risk be diversified away by investing in both Microsoft Corp 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 Microsoft Corp and UnitedHealth Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft Corp CDR and UnitedHealth Group CDR, you can compare the effects of market volatilities on Microsoft Corp 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 Microsoft Corp with a short position of UnitedHealth Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft Corp and UnitedHealth Group.
Diversification Opportunities for Microsoft Corp and UnitedHealth Group
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and UnitedHealth is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp 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 Microsoft Corp 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 Microsoft Corp 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 Microsoft Corp i.e., Microsoft Corp and UnitedHealth Group go up and down completely randomly.
Pair Corralation between Microsoft Corp and UnitedHealth Group
Assuming the 90 days trading horizon Microsoft Corp is expected to generate 7.84 times less return on investment than UnitedHealth Group. But when comparing it to its historical volatility, Microsoft Corp CDR is 1.28 times less risky than UnitedHealth Group. It trades about 0.02 of its potential returns per unit of risk. UnitedHealth Group CDR is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,372 in UnitedHealth Group CDR on September 1, 2024 and sell it today you would earn a total of 529.00 from holding UnitedHealth Group CDR or generate 22.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft Corp CDR vs. UnitedHealth Group CDR
Performance |
| Timeline |
| Microsoft Corp CDR |
| UnitedHealth Group CDR |
Microsoft Corp and UnitedHealth Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft Corp and UnitedHealth Group
The main advantage of trading using opposite Microsoft Corp and UnitedHealth Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp 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.| Microsoft Corp vs. Northview Residential REIT | Microsoft Corp vs. Winshear Gold Corp | Microsoft Corp vs. Wilmington Capital Management | Microsoft Corp vs. Till Capital |
| UnitedHealth Group vs. Exco Technologies Limited | UnitedHealth Group vs. Quorum Information Technologies | UnitedHealth Group vs. Rogers Communications | UnitedHealth Group vs. Ocumetics Technology Corp |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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