Correlation Between Universal Health and Essex Property

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

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

Diversification Opportunities for Universal Health and Essex Property

-0.37

Correlation Coefficient

Universal Health  Essex Property

Very good diversification

The 3 months correlation between Universal and Essex is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services, and Essex Property Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essex Property Trust and Universal 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 Universal Health Services, are associated (or correlated) with Essex Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essex Property Trust has no effect on the direction of Universal Health i.e., Universal Health and Essex Property go up and down completely randomly.

Pair Corralation between Universal Health and Essex Property

If you would invest  29,393  in Universal Health Services, on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Universal Health Services, or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Universal Health Services,  vs.  Essex Property Trust

Universal Health Ser

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. Despite somewhat strong technical indicators, Universal Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Essex Property Trust

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Essex Property Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Essex Property may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Universal Health and Essex Property

The main advantage of trading using opposite Universal Health and Essex Property positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Health position performs unexpectedly, Essex Property 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 Essex Property will offset losses from the drop in Essex Property's long position.

The idea behind Universal Health Services, and Essex Property Trust 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.