Correlation Between Optima Health and Universal Health

Can any of the company-specific risk be diversified away by investing in both Optima 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 Optima 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 Optima Health plc and Universal Health Services, you can compare the effects of market volatilities on Optima 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 Optima Health with a short position of Universal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optima Health and Universal Health.

Diversification Opportunities for Optima Health and Universal Health

-0.33

Correlation Coefficient

Optima Health  Universal Health

Very good diversification

The 3 months correlation between Optima and Universal is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Optima 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 Optima 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 Optima 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 Optima Health i.e., Optima Health and Universal Health go up and down completely randomly.

Pair Corralation between Optima Health and Universal Health

Assuming the 90 days trading horizon Optima Health plc is expected to generate 0.63 times more return on investment than Universal Health. However, Optima Health plc is 1.6 times less risky than Universal Health. It trades about 0.05 of its potential returns per unit of risk. Universal Health Services is currently generating about -0.1 per unit of risk. If you would invest  15,100  in Optima Health plc on September 3, 2024 and sell it today you would earn a total of  450.00  from holding Optima Health plc or generate 2.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	75.0%
Values	Daily Returns

Optima Health plc  vs.  Universal Health Services

Optima Health plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Optima Health plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Optima Health is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Universal Health Services

Risk-Adjusted Performance

0 of 100

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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Optima Health and Universal Health

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

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.