Correlation Between UnitedHealth Group and Tenet Healthcare

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

Diversification Opportunities for UnitedHealth Group and Tenet Healthcare

-0.65

Correlation Coefficient

UnitedHealth Group  Tenet Healthcare

Excellent diversification

The 3 months correlation between UnitedHealth and Tenet is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group Incorporate and Tenet Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenet Healthcare 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 Tenet Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tenet Healthcare has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Tenet Healthcare go up and down completely randomly.

Pair Corralation between UnitedHealth Group and Tenet Healthcare

Considering the 90-day investment horizon UnitedHealth Group Incorporated is expected to generate 1.21 times more return on investment than Tenet Healthcare. However, UnitedHealth Group is 1.21 times more volatile than Tenet Healthcare. It trades about 0.03 of its potential returns per unit of risk. Tenet Healthcare is currently generating about -0.11 per unit of risk. If you would invest  48,588  in UnitedHealth Group Incorporated on January 24, 2024 and sell it today you would earn a total of  535.00  from holding UnitedHealth Group Incorporated or generate 1.1% return on investment over 90 days.

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

UnitedHealth Group Incorporate  vs.  Tenet Healthcare

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.

Tenet Healthcare

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tenet Healthcare are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Tenet Healthcare exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UnitedHealth Group and Tenet Healthcare

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

The idea behind UnitedHealth Group Incorporated and Tenet Healthcare 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.