Correlation Between Universal Health and Bellevue Healthcare

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

By analyzing existing cross correlation between Universal Health Services and Bellevue Healthcare Trust, you can compare the effects of market volatilities on Universal Health and Bellevue Healthcare 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 Universal Health with a short position of Bellevue Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Health and Bellevue Healthcare.

Diversification Opportunities for Universal Health and Bellevue Healthcare

0.77

Correlation Coefficient

Universal Health  Bellevue Healthcare

Poor diversification

The 3 months correlation between Universal and Bellevue is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and Bellevue Healthcare Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bellevue Healthcare Trust and Universal Health 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 Universal Health Services are associated (or correlated) with Bellevue Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bellevue Healthcare Trust has no effect on the direction of Universal Health i.e., Universal Health and Bellevue Healthcare go up and down completely randomly.

Pair Corralation between Universal Health and Bellevue Healthcare

Assuming the 90 days trading horizon Universal Health Services is expected to under-perform the Bellevue Healthcare. In addition to that, Universal Health is 2.19 times more volatile than Bellevue Healthcare Trust. It trades about -0.1 of its total potential returns per unit of risk. Bellevue Healthcare Trust is currently generating about -0.16 per unit of volatility. If you would invest  15,660  in Bellevue Healthcare Trust on September 2, 2024 and sell it today you would lose (1,540) from holding Bellevue Healthcare Trust or give up 9.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.97%
Values	Daily Returns

Universal Health Services  vs.  Bellevue Healthcare Trust

Universal Health Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Health Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Bellevue Healthcare Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bellevue Healthcare Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Universal Health and Bellevue Healthcare

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

The idea behind Universal Health Services and Bellevue Healthcare Trust 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.