Correlation Between Universal Health and Induction Healthcare

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

Diversification Opportunities for Universal Health and Induction Healthcare

-0.58

Correlation Coefficient

Universal Health  Induction Healthcare

Excellent diversification

The 3 months correlation between Universal and Induction is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and Induction Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Induction Healthcare 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 Induction Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Induction Healthcare has no effect on the direction of Universal Health i.e., Universal Health and Induction Healthcare go up and down completely randomly.

Pair Corralation between Universal Health and Induction Healthcare

Assuming the 90 days trading horizon Universal Health Services is expected to generate 0.42 times more return on investment than Induction Healthcare. However, Universal Health Services is 2.38 times less risky than Induction Healthcare. It trades about 0.08 of its potential returns per unit of risk. Induction Healthcare Group is currently generating about -0.04 per unit of risk. If you would invest  13,539  in Universal Health Services on September 1, 2024 and sell it today you would earn a total of  6,961  from holding Universal Health Services or generate 51.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	88.06%
Values	Daily Returns

Universal Health Services  vs.  Induction Healthcare Group

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 December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Induction Healthcare

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Induction Healthcare Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Induction Healthcare may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Universal Health and Induction Healthcare

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

The idea behind Universal Health Services and Induction Healthcare Group 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.