Correlation Between Abingdon Health and Universal Health

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

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

Diversification Opportunities for Abingdon Health and Universal Health

-0.1

Correlation Coefficient

Abingdon Health  Universal Health

Good diversification

The 3 months correlation between Abingdon and Universal is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Abingdon Health Plc and Universal Health Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Health Services and Abingdon 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 Abingdon Health Plc are associated (or correlated) with Universal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Health Services has no effect on the direction of Abingdon Health i.e., Abingdon Health and Universal Health go up and down completely randomly.

Pair Corralation between Abingdon Health and Universal Health

Assuming the 90 days trading horizon Abingdon Health Plc is expected to generate 1.85 times more return on investment than Universal Health. However, Abingdon Health is 1.85 times more volatile than Universal Health Services. It trades about 0.03 of its potential returns per unit of risk. Universal Health Services is currently generating about -0.13 per unit of risk. If you would invest  700.00  in Abingdon Health Plc on November 29, 2024 and sell it today you would earn a total of  25.00  from holding Abingdon Health Plc or generate 3.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.08%
Values	Daily Returns

Abingdon Health Plc  vs.  Universal Health Services

Abingdon Health Plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Abingdon Health Plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Abingdon Health is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Abingdon Health and Universal Health

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

The idea behind Abingdon Health Plc and Universal Health Services 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.