Correlation Between Universal Health and Iron Mountain

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

Diversification Opportunities for Universal Health and Iron Mountain

0.5

Correlation Coefficient

Universal Health  Iron Mountain

Very weak diversification

The 3 months correlation between Universal and Iron is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services, and Iron Mountain Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron Mountain 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 Iron Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron Mountain has no effect on the direction of Universal Health i.e., Universal Health and Iron Mountain go up and down completely randomly.

Pair Corralation between Universal Health and Iron Mountain

Assuming the 90 days trading horizon Universal Health Services, is expected to under-perform the Iron Mountain. In addition to that, Universal Health is 1.17 times more volatile than Iron Mountain Incorporated. It trades about -0.24 of its total potential returns per unit of risk. Iron Mountain Incorporated is currently generating about -0.26 per unit of volatility. If you would invest  64,260  in Iron Mountain Incorporated on October 25, 2024 and sell it today you would lose (3,252) from holding Iron Mountain Incorporated or give up 5.06% of portfolio value over 90 days.

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

Universal Health Services,  vs.  Iron Mountain Incorporated

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 weak performance in the last few months, the Stock's technical indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Iron Mountain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron Mountain Incorporated 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 somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Universal Health and Iron Mountain

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

The idea behind Universal Health Services, and Iron Mountain Incorporated 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 Transaction History module to view history of all your transactions and understand their impact on performance.