Correlation Between Electromed and Universal Health

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

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

Diversification Opportunities for Electromed and Universal Health

0.06

Correlation Coefficient

Electromed  Universal Health

Significant diversification

The 3 months correlation between Electromed and Universal is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Electromed 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 Electromed 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 Electromed 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 Electromed i.e., Electromed and Universal Health go up and down completely randomly.

Pair Corralation between Electromed and Universal Health

Given the investment horizon of 90 days Electromed is expected to under-perform the Universal Health. In addition to that, Electromed is 2.24 times more volatile than Universal Health Services. It trades about -0.05 of its total potential returns per unit of risk. Universal Health Services is currently generating about -0.08 per unit of volatility. If you would invest  20,480  in Universal Health Services on November 28, 2024 and sell it today you would lose (1,579) from holding Universal Health Services or give up 7.71% of portfolio value over 90 days.

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

Electromed  vs.  Universal Health Services

Electromed

Risk-Adjusted Performance

Very Weak

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

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

Pair Trading with Electromed and Universal Health

The main advantage of trading using opposite Electromed and Universal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electromed 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 Electromed 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.