Correlation Between One Media and Universal Health

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

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

Diversification Opportunities for One Media and Universal Health

0.34

Correlation Coefficient

One Media  Universal Health

Weak diversification

The 3 months correlation between One and Universal is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding One Media iP 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 One Media 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 One Media iP 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 One Media i.e., One Media and Universal Health go up and down completely randomly.

Pair Corralation between One Media and Universal Health

Assuming the 90 days trading horizon One Media is expected to generate 1.67 times less return on investment than Universal Health. But when comparing it to its historical volatility, One Media iP is 1.65 times less risky than Universal Health. It trades about 0.01 of its potential returns per unit of risk. Universal Health Services is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  18,101  in Universal Health Services on December 24, 2024 and sell it today you would lose (93.00) from holding Universal Health Services or give up 0.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.55%
Values	Daily Returns

One Media iP  vs.  Universal Health Services

One Media iP

Risk-Adjusted Performance

Very Weak

Over the last 90 days One Media iP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, One Media is not utilizing all of its potentials. The newest 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 comparatively stable basic 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 One Media and Universal Health

The main advantage of trading using opposite One Media and Universal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if One Media 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 One Media iP 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.