Correlation Between Universal Health and Fulgent Genetics

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

Diversification Opportunities for Universal Health and Fulgent Genetics

0.66

Correlation Coefficient

Universal Health  Fulgent Genetics

Poor diversification

The 3 months correlation between Universal and Fulgent is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and Fulgent Genetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fulgent Genetics 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 Fulgent Genetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fulgent Genetics has no effect on the direction of Universal Health i.e., Universal Health and Fulgent Genetics go up and down completely randomly.

Pair Corralation between Universal Health and Fulgent Genetics

Considering the 90-day investment horizon Universal Health Services is expected to generate 0.79 times more return on investment than Fulgent Genetics. However, Universal Health Services is 1.27 times less risky than Fulgent Genetics. It trades about -0.1 of its potential returns per unit of risk. Fulgent Genetics is currently generating about -0.1 per unit of risk. If you would invest  23,647  in Universal Health Services on August 31, 2024 and sell it today you would lose (3,297) from holding Universal Health Services or give up 13.94% 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.  Fulgent Genetics

Universal Health Services

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. In spite of fragile performance in the last few months, the Stock's technical indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Fulgent Genetics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fulgent Genetics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Universal Health and Fulgent Genetics

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

The idea behind Universal Health Services and Fulgent Genetics 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 Global Correlations module to find global opportunities by holding instruments from different markets.