Correlation Between Pacific Hospital and U Media

Can any of the company-specific risk be diversified away by investing in both Pacific Hospital and U Media 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 Pacific Hospital and U Media into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pacific Hospital Supply and U Media Communications, you can compare the effects of market volatilities on Pacific Hospital and U Media 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 Pacific Hospital with a short position of U Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Hospital and U Media.

Diversification Opportunities for Pacific Hospital and U Media

0.01

Correlation Coefficient

Pacific Hospital  U Media

Significant diversification

The 3 months correlation between Pacific and 6470 is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Hospital Supply and U Media Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Media Communications and Pacific Hospital 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 Pacific Hospital Supply are associated (or correlated) with U Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Media Communications has no effect on the direction of Pacific Hospital i.e., Pacific Hospital and U Media go up and down completely randomly.

Pair Corralation between Pacific Hospital and U Media

Assuming the 90 days trading horizon Pacific Hospital Supply is expected to under-perform the U Media. But the stock apears to be less risky and, when comparing its historical volatility, Pacific Hospital Supply is 1.91 times less risky than U Media. The stock trades about -0.11 of its potential returns per unit of risk. The U Media Communications is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  5,380  in U Media Communications on December 30, 2024 and sell it today you would earn a total of  20.00  from holding U Media Communications or generate 0.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Pacific Hospital Supply  vs.  U Media Communications

Pacific Hospital Supply

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacific Hospital Supply has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Pacific Hospital is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

U Media Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days U Media Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, U Media is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Pacific Hospital and U Media

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

The idea behind Pacific Hospital Supply and U Media Communications 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 Transaction History module to view history of all your transactions and understand their impact on performance.