Correlation Between UnitedHealth Group and Select Medical

Can any of the company-specific risk be diversified away by investing in both UnitedHealth Group and Select Medical 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 Select Medical 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 Select Medical Holdings, you can compare the effects of market volatilities on UnitedHealth Group and Select Medical 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 Select Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of UnitedHealth Group and Select Medical.

Diversification Opportunities for UnitedHealth Group and Select Medical

-0.67

Correlation Coefficient

UnitedHealth Group  Select Medical

Excellent diversification

The 3 months correlation between UnitedHealth and Select is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group Incorporate and Select Medical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Medical Holdings 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 Select Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Medical Holdings has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Select Medical go up and down completely randomly.

Pair Corralation between UnitedHealth Group and Select Medical

Considering the 90-day investment horizon UnitedHealth Group Incorporated is expected to generate 1.29 times more return on investment than Select Medical. However, UnitedHealth Group is 1.29 times more volatile than Select Medical Holdings. It trades about -0.01 of its potential returns per unit of risk. Select Medical Holdings is currently generating about -0.09 per unit of risk. If you would invest  49,231  in UnitedHealth Group Incorporated on January 26, 2024 and sell it today you would lose (501.00) from holding UnitedHealth Group Incorporated or give up 1.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

UnitedHealth Group Incorporate  vs.  Select Medical Holdings

UnitedHealth Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UnitedHealth Group Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, UnitedHealth Group is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Select Medical Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Select Medical Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Select Medical may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with UnitedHealth Group and Select Medical

The main advantage of trading using opposite UnitedHealth Group and Select Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UnitedHealth Group position performs unexpectedly, Select Medical 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 Select Medical will offset losses from the drop in Select Medical's long position.

The idea behind UnitedHealth Group Incorporated and Select Medical Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.