Correlation Between Universal Health and Ensign

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

Diversification Opportunities for Universal Health and Ensign

0.79

Correlation Coefficient

Universal Health  Ensign

Poor diversification

The 3 months correlation between Universal and Ensign is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and The Ensign Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ensign Group 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 Ensign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ensign Group has no effect on the direction of Universal Health i.e., Universal Health and Ensign go up and down completely randomly.

Pair Corralation between Universal Health and Ensign

Considering the 90-day investment horizon Universal Health Services is expected to generate 0.59 times more return on investment than Ensign. However, Universal Health Services is 1.69 times less risky than Ensign. It trades about -0.03 of its potential returns per unit of risk. The Ensign Group is currently generating about -0.05 per unit of risk. If you would invest  19,127  in Universal Health Services on November 28, 2024 and sell it today you would lose (226.00) from holding Universal Health Services or give up 1.18% of portfolio value over 90 days.

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

Universal Health Services  vs.  The Ensign Group

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. In spite of latest fragile performance, the Stock's technical indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Ensign Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Ensign Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Universal Health and Ensign

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

The idea behind Universal Health Services and The Ensign Group 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 CEOs Directory module to screen CEOs from public companies around the world.