Correlation Between Healthcare Realty and Universal Health

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

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

Diversification Opportunities for Healthcare Realty and Universal Health

0.6

Correlation Coefficient

Healthcare Realty  Universal Health

Poor diversification

The 3 months correlation between Healthcare and Universal is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Realty Trust 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 Healthcare Realty 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 Healthcare Realty Trust 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 Healthcare Realty i.e., Healthcare Realty and Universal Health go up and down completely randomly.

Pair Corralation between Healthcare Realty and Universal Health

Allowing for the 90-day total investment horizon Healthcare Realty is expected to generate 4.38 times less return on investment than Universal Health. But when comparing it to its historical volatility, Healthcare Realty Trust is 1.1 times less risky than Universal Health. It trades about 0.04 of its potential returns per unit of risk. Universal Health Realty is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,581  in Universal Health Realty on December 30, 2024 and sell it today you would earn a total of  497.00  from holding Universal Health Realty or generate 13.88% return on investment over 90 days.

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

Healthcare Realty Trust  vs.  Universal Health Realty

Healthcare Realty Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Realty Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Healthcare Realty is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Universal Health Realty

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Health Realty are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical indicators, Universal Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Healthcare Realty and Universal Health

The main advantage of trading using opposite Healthcare Realty and Universal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Healthcare Realty 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 Healthcare Realty Trust 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.