Correlation Between Oncology Institute and Universal Health

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

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

Diversification Opportunities for Oncology Institute and Universal Health

0.64

Correlation Coefficient

Oncology Institute  Universal Health

Poor diversification

The 3 months correlation between Oncology and Universal is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Oncology Institute 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 Oncology Institute 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 Oncology Institute 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 Oncology Institute i.e., Oncology Institute and Universal Health go up and down completely randomly.

Pair Corralation between Oncology Institute and Universal Health

Considering the 90-day investment horizon Oncology Institute is expected to under-perform the Universal Health. In addition to that, Oncology Institute is 3.5 times more volatile than Universal Health Services. It trades about -0.13 of its total potential returns per unit of risk. Universal Health Services is currently generating about -0.1 per unit of volatility. If you would invest  23,647  in Universal Health Services on September 2, 2024 and sell it today you would lose (3,147) from holding Universal Health Services or give up 13.31% of portfolio value over 90 days.

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

Oncology Institute  vs.  Universal Health Services

Oncology Institute

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oncology Institute has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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 fragile performance in the last few months, the Stock's technical 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 Oncology Institute and Universal Health

The main advantage of trading using opposite Oncology Institute and Universal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oncology Institute 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 Oncology Institute 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.