Correlation Between Exxon and UnitedHealth Group

Can any of the company-specific risk be diversified away by investing in both Exxon 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 Exxon and UnitedHealth Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Exxon Mobil Corp and UnitedHealth Group Incorporated, you can compare the effects of market volatilities on Exxon 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 Exxon with a short position of UnitedHealth Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and UnitedHealth Group.

Diversification Opportunities for Exxon and UnitedHealth Group

-0.16

Correlation Coefficient

Exxon  UnitedHealth Group

Good diversification

The 24 months correlation between Exxon and UnitedHealth is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil 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 Exxon 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 Exxon Mobil 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 Exxon i.e., Exxon and UnitedHealth Group go up and down completely randomly.

Pair Corralation between Exxon and UnitedHealth Group

Considering the 90-day investment horizon Exxon Mobil Corp is expected to under-perform the UnitedHealth Group. But the stock apears to be less risky and, when comparing its historical volatility, Exxon Mobil Corp is 1.64 times less risky than UnitedHealth Group. The stock trades about -0.09 of its potential returns per unit of risk. The UnitedHealth Group Incorporated is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  45,972  in UnitedHealth Group Incorporated on February 9, 2024 and sell it today you would earn a total of  4,731  from holding UnitedHealth Group Incorporated or generate 10.29% return on investment over 90 days.

Time Period	24 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Exxon Mobil Corp  vs.  UnitedHealth Group Incorporate

Exxon Mobil Corp

Risk-Adjusted Performance

3 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Exxon is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

UnitedHealth Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UnitedHealth Group Incorporated are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Exxon and UnitedHealth Group

The main advantage of trading using opposite Exxon and UnitedHealth Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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.

The idea behind Exxon Mobil Corp and UnitedHealth Group Incorporated 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.