Correlation Between Universal Health and MEDICAL FACILITIES

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

Diversification Opportunities for Universal Health and MEDICAL FACILITIES

0.37

Correlation Coefficient

Universal Health  MEDICAL FACILITIES

Weak diversification

The 3 months correlation between Universal and MEDICAL is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and MEDICAL FACILITIES NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEDICAL FACILITIES NEW 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 MEDICAL FACILITIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEDICAL FACILITIES NEW has no effect on the direction of Universal Health i.e., Universal Health and MEDICAL FACILITIES go up and down completely randomly.

Pair Corralation between Universal Health and MEDICAL FACILITIES

Assuming the 90 days horizon Universal Health is expected to generate 2.68 times less return on investment than MEDICAL FACILITIES. But when comparing it to its historical volatility, Universal Health Services is 2.04 times less risky than MEDICAL FACILITIES. It trades about 0.01 of its potential returns per unit of risk. MEDICAL FACILITIES NEW is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,014  in MEDICAL FACILITIES NEW on December 30, 2024 and sell it today you would lose (14.00) from holding MEDICAL FACILITIES NEW or give up 1.38% of portfolio value over 90 days.

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

Universal Health Services  vs.  MEDICAL FACILITIES NEW

Universal Health Services

Risk-Adjusted Performance

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 nearly stable basic indicators, Universal Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MEDICAL FACILITIES NEW

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MEDICAL FACILITIES NEW are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, MEDICAL FACILITIES is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Universal Health and MEDICAL FACILITIES

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

The idea behind Universal Health Services and MEDICAL FACILITIES NEW 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.