Correlation Between CVS Health and UnitedHealth Group
Can any of the company-specific risk be diversified away by investing in both CVS Health 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 CVS Health and UnitedHealth Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health Corp and UnitedHealth Group Incorporated, you can compare the effects of market volatilities on CVS Health 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 CVS Health with a short position of UnitedHealth Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and UnitedHealth Group.
Diversification Opportunities for CVS Health and UnitedHealth Group
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CVS and UnitedHealth is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and UnitedHealth Group Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group and CVS Health 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 CVS Health Corp 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 CVS Health i.e., CVS Health and UnitedHealth Group go up and down completely randomly.
Pair Corralation between CVS Health and UnitedHealth Group
Considering the 90-day investment horizon CVS Health Corp is expected to under-perform the UnitedHealth Group. But the stock apears to be less risky and, when comparing its historical volatility, CVS Health Corp is 1.2 times less risky than UnitedHealth Group. The stock trades about -0.32 of its potential returns per unit of risk. The UnitedHealth Group Incorporated is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 48,588 in UnitedHealth Group Incorporated on January 25, 2024 and sell it today you would earn a total of 30.00 from holding UnitedHealth Group Incorporated or generate 0.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health Corp vs. UnitedHealth Group Incorporate
Performance |
| Timeline |
| CVS Health Corp |
| UnitedHealth Group |
CVS Health and UnitedHealth Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and UnitedHealth Group
The main advantage of trading using opposite CVS Health and UnitedHealth Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health 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.| CVS Health vs. Humana Inc | CVS Health vs. Cigna Corp | CVS Health vs. Elevance Health | CVS Health vs. Centene Corp |
| 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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