Correlation Between Universal Health and Lifestance Health

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

Diversification Opportunities for Universal Health and Lifestance Health

-0.4

Correlation Coefficient

Universal Health  Lifestance Health

Very good diversification

The 3 months correlation between Universal and Lifestance is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and Lifestance Health Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifestance Health 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 Lifestance Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifestance Health has no effect on the direction of Universal Health i.e., Universal Health and Lifestance Health go up and down completely randomly.

Pair Corralation between Universal Health and Lifestance Health

Considering the 90-day investment horizon Universal Health Services is expected to generate 0.5 times more return on investment than Lifestance Health. However, Universal Health Services is 2.01 times less risky than Lifestance Health. It trades about 0.06 of its potential returns per unit of risk. Lifestance Health Group is currently generating about 0.03 per unit of risk. If you would invest  13,918  in Universal Health Services on September 28, 2024 and sell it today you would earn a total of  3,980  from holding Universal Health Services or generate 28.6% return on investment over 90 days.

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

Universal Health Services  vs.  Lifestance Health Group

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 inconsistent performance in the last few months, the Stock's technical indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Lifestance Health

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lifestance Health Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Lifestance Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Universal Health and Lifestance Health

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

The idea behind Universal Health Services and Lifestance Health 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.