Correlation Between Global Medical and Universal Health

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

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

Diversification Opportunities for Global Medical and Universal Health

0.85

Correlation Coefficient

Global Medical  Universal Health

Very poor diversification

The 3 months correlation between Global and Universal is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Global Medical REIT and Universal Health Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Health Realty and Global Medical 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 Global Medical REIT 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 Realty has no effect on the direction of Global Medical i.e., Global Medical and Universal Health go up and down completely randomly.

Pair Corralation between Global Medical and Universal Health

Given the investment horizon of 90 days Global Medical REIT is expected to generate 0.93 times more return on investment than Universal Health. However, Global Medical REIT is 1.08 times less risky than Universal Health. It trades about -0.02 of its potential returns per unit of risk. Universal Health Realty is currently generating about -0.04 per unit of risk. If you would invest  866.00  in Global Medical REIT on November 28, 2024 and sell it today you would lose (17.00) from holding Global Medical REIT or give up 1.96% of portfolio value over 90 days.

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

Global Medical REIT  vs.  Universal Health Realty

Global Medical REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Medical REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Global Medical is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Universal Health Realty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Universal Health Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, Universal Health 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 Global Medical and Universal Health

The main advantage of trading using opposite Global Medical and Universal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Medical 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 Global Medical REIT and Universal Health Realty 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.