Correlation Between Universal Health and Samsung Electronics

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

Diversification Opportunities for Universal Health and Samsung Electronics

-0.23

Correlation Coefficient

Universal Health  Samsung Electronics

Very good diversification

The 3 months correlation between Universal and Samsung is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and Samsung Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Electronics 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 Samsung Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Electronics has no effect on the direction of Universal Health i.e., Universal Health and Samsung Electronics go up and down completely randomly.

Pair Corralation between Universal Health and Samsung Electronics

Assuming the 90 days trading horizon Universal Health Services is expected to generate 1.04 times more return on investment than Samsung Electronics. However, Universal Health is 1.04 times more volatile than Samsung Electronics Co. It trades about 0.06 of its potential returns per unit of risk. Samsung Electronics Co is currently generating about -0.01 per unit of risk. If you would invest  11,493  in Universal Health Services on December 4, 2024 and sell it today you would earn a total of  5,799  from holding Universal Health Services or generate 50.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	87.75%
Values	Daily Returns

Universal Health Services  vs.  Samsung Electronics Co

Universal Health Services

Risk-Adjusted Performance

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Samsung Electronics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Electronics Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Samsung Electronics is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Universal Health and Samsung Electronics

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

The idea behind Universal Health Services and Samsung Electronics Co 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.