Correlation Between Universal Health and Halliburton

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

Diversification Opportunities for Universal Health and Halliburton

-0.52

Correlation Coefficient

Universal Health  Halliburton

Excellent diversification

The 3 months correlation between Universal and Halliburton is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services, and Halliburton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halliburton 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 Halliburton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halliburton has no effect on the direction of Universal Health i.e., Universal Health and Halliburton go up and down completely randomly.

Pair Corralation between Universal Health and Halliburton

Assuming the 90 days trading horizon Universal Health Services, is expected to under-perform the Halliburton. But the stock apears to be less risky and, when comparing its historical volatility, Universal Health Services, is 1.41 times less risky than Halliburton. The stock trades about 0.0 of its potential returns per unit of risk. The Halliburton is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  16,279  in Halliburton on October 7, 2024 and sell it today you would earn a total of  959.00  from holding Halliburton or generate 5.89% return on investment over 90 days.

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

Universal Health Services,  vs.  Halliburton

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.

Halliburton

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Halliburton are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Halliburton may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Universal Health and Halliburton

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

The idea behind Universal Health Services, and Halliburton 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.