Correlation Between Universal Health and Rede DOr

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

Diversification Opportunities for Universal Health and Rede DOr

0.46

Correlation Coefficient

Universal Health  Rede DOr

Very weak diversification

The 3 months correlation between Universal and Rede is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services, and Rede DOr So in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rede DOr So 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 Rede DOr. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rede DOr So has no effect on the direction of Universal Health i.e., Universal Health and Rede DOr go up and down completely randomly.

Pair Corralation between Universal Health and Rede DOr

Assuming the 90 days trading horizon Universal Health Services, is expected to under-perform the Rede DOr. In addition to that, Universal Health is 1.01 times more volatile than Rede DOr So. It trades about -0.11 of its total potential returns per unit of risk. Rede DOr So is currently generating about -0.09 per unit of volatility. If you would invest  2,961  in Rede DOr So on October 22, 2024 and sell it today you would lose (290.00) from holding Rede DOr So or give up 9.79% 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.  Rede DOr So

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 latest weak performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Rede DOr So

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rede DOr So has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the 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 Rede DOr

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

The idea behind Universal Health Services, and Rede DOr So 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.