Correlation Between UnitedHealth Group and PayPal Holdings

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

By analyzing existing cross correlation between UnitedHealth Group CDR and PayPal Holdings CDR, you can compare the effects of market volatilities on UnitedHealth Group and PayPal Holdings 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 PayPal Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of UnitedHealth Group and PayPal Holdings.

Diversification Opportunities for UnitedHealth Group and PayPal Holdings

0.04

Correlation Coefficient

UnitedHealth Group  PayPal Holdings

Significant diversification

The 3 months correlation between UnitedHealth and PayPal is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group CDR and PayPal Holdings CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings CDR 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 CDR are associated (or correlated) with PayPal Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PayPal Holdings CDR has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and PayPal Holdings go up and down completely randomly.

Pair Corralation between UnitedHealth Group and PayPal Holdings

Assuming the 90 days trading horizon UnitedHealth Group is expected to generate 3.4 times less return on investment than PayPal Holdings. But when comparing it to its historical volatility, UnitedHealth Group CDR is 1.39 times less risky than PayPal Holdings. It trades about 0.02 of its potential returns per unit of risk. PayPal Holdings CDR is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  473.00  in PayPal Holdings CDR on September 14, 2024 and sell it today you would earn a total of  191.00  from holding PayPal Holdings CDR or generate 40.38% return on investment over 90 days.

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

UnitedHealth Group CDR  vs.  PayPal Holdings CDR

UnitedHealth Group CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UnitedHealth Group CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

PayPal Holdings CDR

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings CDR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, PayPal Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UnitedHealth Group and PayPal Holdings

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

The idea behind UnitedHealth Group CDR and PayPal Holdings CDR 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.