Correlation Between Universal Health and United Natural

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

Diversification Opportunities for Universal Health and United Natural

-0.55

Correlation Coefficient

Universal Health  United Natural

Excellent diversification

The 3 months correlation between Universal and United is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services, and United Natural Foods, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Natural Foods, 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 United Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Natural Foods, has no effect on the direction of Universal Health i.e., Universal Health and United Natural go up and down completely randomly.

Pair Corralation between Universal Health and United Natural

Assuming the 90 days trading horizon Universal Health Services, is expected to under-perform the United Natural. But the stock apears to be less risky and, when comparing its historical volatility, Universal Health Services, is 1.15 times less risky than United Natural. The stock trades about -0.24 of its potential returns per unit of risk. The United Natural Foods, is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  4,131  in United Natural Foods, on October 25, 2024 and sell it today you would lose (201.00) from holding United Natural Foods, or give up 4.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Universal Health Services,  vs.  United Natural Foods,

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.

United Natural Foods,

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Natural Foods, are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, United Natural sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Health and United Natural

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

The idea behind Universal Health Services, and United Natural Foods, 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.