Correlation Between UnitedHealth Group and Merck
Can any of the company-specific risk be diversified away by investing in both UnitedHealth Group and Merck 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 Merck 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 Merck Co, you can compare the effects of market volatilities on UnitedHealth Group and Merck 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 Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of UnitedHealth Group and Merck.
Diversification Opportunities for UnitedHealth Group and Merck
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between UnitedHealth and Merck is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group Incorporate and Merck Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck 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 Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Merck go up and down completely randomly.
Pair Corralation between UnitedHealth Group and Merck
Assuming the 90 days trading horizon UnitedHealth Group Incorporated is expected to generate 1.04 times more return on investment than Merck. However, UnitedHealth Group is 1.04 times more volatile than Merck Co. It trades about 0.16 of its potential returns per unit of risk. Merck Co is currently generating about -0.04 per unit of risk. If you would invest 3,789 in UnitedHealth Group Incorporated on September 3, 2024 and sell it today you would earn a total of 1,457 from holding UnitedHealth Group Incorporated or generate 38.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
UnitedHealth Group Incorporate vs. Merck Co
Performance |
| Timeline |
| UnitedHealth Group |
| Merck |
UnitedHealth Group and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UnitedHealth Group and Merck
The main advantage of trading using opposite UnitedHealth Group and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UnitedHealth Group position performs unexpectedly, Merck 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 Merck will offset losses from the drop in Merck's long position.| UnitedHealth Group vs. Odontoprev SA | UnitedHealth Group vs. Fundo Investimento Imobiliario | UnitedHealth Group vs. Fras le SA | UnitedHealth Group vs. Western Digital |
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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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