Correlation Between UnitedHealth Group and ConocoPhillips

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

Diversification Opportunities for UnitedHealth Group and ConocoPhillips

0.72

Correlation Coefficient

UnitedHealth Group  ConocoPhillips

Poor diversification

The 3 months correlation between UnitedHealth and ConocoPhillips is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group Incorporate and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips 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 ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and ConocoPhillips go up and down completely randomly.

Pair Corralation between UnitedHealth Group and ConocoPhillips

Assuming the 90 days trading horizon UnitedHealth Group Incorporated is expected to generate 1.26 times more return on investment than ConocoPhillips. However, UnitedHealth Group is 1.26 times more volatile than ConocoPhillips. It trades about 0.06 of its potential returns per unit of risk. ConocoPhillips is currently generating about 0.01 per unit of risk. If you would invest  900,321  in UnitedHealth Group Incorporated on September 30, 2024 and sell it today you would earn a total of  131,679  from holding UnitedHealth Group Incorporated or generate 14.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.2%
Values	Daily Returns

UnitedHealth Group Incorporate  vs.  ConocoPhillips

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. In spite of latest weak performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

ConocoPhillips

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ConocoPhillips are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, ConocoPhillips may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with UnitedHealth Group and ConocoPhillips

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

The idea behind UnitedHealth Group Incorporated and ConocoPhillips 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.