UNH investors herd to book profits while the going is good
18 Dec, 201813 min read
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UNH significantly underperformed today. On a longer term basis, investors in UNITEDHEALTH GROUP INC made -0.11% per day. Tuesday's performance of -1.98% was a significant underperformance compared to it's daily average.
Buy-and-Hold investors in UNH experienced a maximum drawdown of -11.65% over the last three months. It lost -4.66% during this down trending period. There were both Long and Short signals during this period, where the short signals were significantly more profitable than the long signals.
UNH has been underperforming the SP500 index in recent time, after having outperformed till 3 Dec, 2018. Over the last 2 years 11 months and 14 days, UNH outperformed the SP500 index on 55% days.
During the last three months UNH was mostly loss making and delivered on average -0.06% per day. It's best return during this period (of +4.73%) was on Tuesday, 16 Oct, 2018. While it's worst loss in the same period (of -3.22%) was on Wednesday, 24 Oct, 2018. There was initially a bullish trend during this period which started on 27 Sep, 2018 and went on till 3 Oct, 2018. The bullish trend returned +3.01% to investors. This was followed by a bearish trend that started on 9 Nov, 2018 and ended on 15 Nov, 2018. This bearish trend lost -4.3% of investor capital.
UNH had 7 profitable and 5 loss making months over the last year. During the last year, UNH underperformed SP500 index on monthly return basis. UNH was also a more risky investment than SP500 index as it's worst month in the last year, Dec 2018, returned -10.09% compared to -7.75% returned by SP500 index in Dec 2018. UNH had a shorter streak of profitable months than SP500 index. It only went up in 5 straight months during the last year. It is interesting to note that both UNH and SP500 index significantly outperform during months when quarterly/annual results are announced.
"The thing I have discovered about working with personal finance is that the good news is that it is not rocket science. Personal finance is about 80 percent behavior. It is only about 20 percent head knowledge.
UNH is becoming more volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant surge in UNH's volatility from 21 Sep, 2018 to 10 Dec, 2018. While there was a significant surge in the SP500 index's volatility from 19 Sep, 2018 to 29 Oct, 2018.
Advanced/professional short-term investors should note that UNH has negative skewness in it's return distribution. This indicates that investors may need to stay invested through long periods of drawdown before expecting a recovery.
Investors trading in UNH derivatives at this moment can consider 'Bull Call Spread' options strategy to receive better risk-adjusted returns.
UNH has more chance of extreme outcomes than the SP500 index. Therefore, UNH must receive a lower allocation than SP500 in your portfolio. SP500 index usually has shorter drawdown period than UNH.
On a general note (since you are interested in UNH), MSFT is a large cap that deserves to be closely tracked for investment opportunities.
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