Correlation Between UnitedHealth Group and Nordstrom

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

Diversification Opportunities for UnitedHealth Group and Nordstrom

0.22

Correlation Coefficient

UnitedHealth Group  Nordstrom

Modest diversification

The 3 months correlation between UnitedHealth and Nordstrom is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding UnitedHealth Group Incorporate and Nordstrom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordstrom 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 Nordstrom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordstrom has no effect on the direction of UnitedHealth Group i.e., UnitedHealth Group and Nordstrom go up and down completely randomly.

Pair Corralation between UnitedHealth Group and Nordstrom

Assuming the 90 days trading horizon UnitedHealth Group is expected to generate 1.4 times less return on investment than Nordstrom. But when comparing it to its historical volatility, UnitedHealth Group Incorporated is 1.07 times less risky than Nordstrom. It trades about 0.06 of its potential returns per unit of risk. Nordstrom is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  11,544  in Nordstrom on September 27, 2024 and sell it today you would earn a total of  2,317  from holding Nordstrom or generate 20.07% return on investment over 90 days.

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

UnitedHealth Group Incorporate  vs.  Nordstrom

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 somewhat strong technical indicators, UnitedHealth Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nordstrom

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordstrom are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nordstrom may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with UnitedHealth Group and Nordstrom

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

The idea behind UnitedHealth Group Incorporated and Nordstrom 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.