Correlation Between Microsoft and UnitedHealth Group
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 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 and UnitedHealth Group Incorporated, you can compare the effects of market volatilities on Microsoft 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 with a short position of UnitedHealth Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and UnitedHealth Group.
Diversification Opportunities for Microsoft and UnitedHealth Group
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and UnitedHealth is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and UnitedHealth Group Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group and Microsoft 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 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 Microsoft i.e., Microsoft and UnitedHealth Group go up and down completely randomly.
Pair Corralation between Microsoft and UnitedHealth Group
Given the investment horizon of 90 days Microsoft is expected to generate 0.99 times more return on investment than UnitedHealth Group. However, Microsoft is 1.01 times less risky than UnitedHealth Group. It trades about 0.08 of its potential returns per unit of risk. UnitedHealth Group Incorporated is currently generating about 0.03 per unit of risk. If you would invest 25,307 in Microsoft on September 4, 2024 and sell it today you would earn a total of 17,813 from holding Microsoft or generate 70.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. UnitedHealth Group Incorporate
Performance |
| Timeline |
| Microsoft |
| UnitedHealth Group |
Microsoft and UnitedHealth Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and UnitedHealth Group
The main advantage of trading using opposite Microsoft and UnitedHealth Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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 vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| UnitedHealth Group vs. Cigna Corp | UnitedHealth Group vs. Humana Inc | UnitedHealth Group vs. Elevance Health | UnitedHealth Group vs. Centene 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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