Correlation Between Universal Health and Metalurgica Gerdau

Can any of the company-specific risk be diversified away by investing in both Universal Health and Metalurgica Gerdau 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 Metalurgica Gerdau 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 Metalurgica Gerdau SA, you can compare the effects of market volatilities on Universal Health and Metalurgica Gerdau 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 Metalurgica Gerdau. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Health and Metalurgica Gerdau.

Diversification Opportunities for Universal Health and Metalurgica Gerdau

-0.65

Correlation Coefficient

Universal Health  Metalurgica Gerdau

Excellent diversification

The 3 months correlation between Universal and Metalurgica is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services, and Metalurgica Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalurgica Gerdau 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 Metalurgica Gerdau. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalurgica Gerdau has no effect on the direction of Universal Health i.e., Universal Health and Metalurgica Gerdau go up and down completely randomly.

Pair Corralation between Universal Health and Metalurgica Gerdau

Assuming the 90 days trading horizon Universal Health Services, is expected to generate 0.16 times more return on investment than Metalurgica Gerdau. However, Universal Health Services, is 6.16 times less risky than Metalurgica Gerdau. It trades about 0.2 of its potential returns per unit of risk. Metalurgica Gerdau SA is currently generating about -0.19 per unit of risk. If you would invest  28,735  in Universal Health Services, on October 7, 2024 and sell it today you would earn a total of  658.00  from holding Universal Health Services, or generate 2.29% return on investment over 90 days.

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

Universal Health Services,  vs.  Metalurgica Gerdau SA

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Metalurgica Gerdau

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metalurgica Gerdau SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Preferred Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Universal Health and Metalurgica Gerdau

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

The idea behind Universal Health Services, and Metalurgica Gerdau SA 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.