Correlation Between UnitedHealth Group and Universal Health

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

Diversification Opportunities for UnitedHealth Group and Universal Health

-0.46

Correlation Coefficient

UnitedHealth Group  Universal Health

Very good diversification

The 3 months correlation between UnitedHealth and Universal is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group Incorporate and Universal Health Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Health Services 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 Universal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Health Services has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Universal Health go up and down completely randomly.

Pair Corralation between UnitedHealth Group and Universal Health

Considering the 90-day investment horizon UnitedHealth Group Incorporated is expected to generate 1.28 times more return on investment than Universal Health. However, UnitedHealth Group is 1.28 times more volatile than Universal Health Services. It trades about 0.03 of its potential returns per unit of risk. Universal Health Services is currently generating about -0.25 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

UnitedHealth Group Incorporate  vs.  Universal Health Services

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.

Universal Health Services

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Health Services are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical indicators, Universal Health is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with UnitedHealth Group and Universal Health

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

The idea behind UnitedHealth Group Incorporated and Universal Health Services 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.