Correlation Between UnitedHealth Group and Applied Materials
Can any of the company-specific risk be diversified away by investing in both UnitedHealth Group and Applied Materials 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 UnitedHealth Group and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UnitedHealth Group Incorporated and Applied Materials, you can compare the effects of market volatilities on UnitedHealth Group and Applied Materials 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 UnitedHealth Group with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of UnitedHealth Group and Applied Materials.
Diversification Opportunities for UnitedHealth Group and Applied Materials
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between UnitedHealth and Applied is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group Incorporate and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and UnitedHealth Group 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 UnitedHealth Group Incorporated are associated (or correlated) with Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Applied Materials go up and down completely randomly.
Pair Corralation between UnitedHealth Group and Applied Materials
Assuming the 90 days trading horizon UnitedHealth Group Incorporated is expected to under-perform the Applied Materials. But the stock apears to be less risky and, when comparing its historical volatility, UnitedHealth Group Incorporated is 1.11 times less risky than Applied Materials. The stock trades about -0.01 of its potential returns per unit of risk. The Applied Materials is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 363,116 in Applied Materials on November 2, 2024 and sell it today you would earn a total of 9,384 from holding Applied Materials or generate 2.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
UnitedHealth Group Incorporate vs. Applied Materials
Performance |
| Timeline |
| UnitedHealth Group |
| Applied Materials |
UnitedHealth Group and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UnitedHealth Group and Applied Materials
The main advantage of trading using opposite UnitedHealth Group and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UnitedHealth Group position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| UnitedHealth Group vs. Micron Technology | UnitedHealth Group vs. The Home Depot | UnitedHealth Group vs. Delta Air Lines | UnitedHealth Group vs. New Oriental Education |
| Applied Materials vs. Southwest Airlines | Applied Materials vs. Deutsche Bank Aktiengesellschaft | Applied Materials vs. Capital One Financial | Applied Materials vs. DXC Technology |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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