Correlation Between Universal Health and National HealthCare

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

Diversification Opportunities for Universal Health and National HealthCare

0.25

Correlation Coefficient

Universal Health  National HealthCare

Modest diversification

The 3 months correlation between Universal and National is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and National HealthCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National HealthCare 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 National HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National HealthCare has no effect on the direction of Universal Health i.e., Universal Health and National HealthCare go up and down completely randomly.

Pair Corralation between Universal Health and National HealthCare

Considering the 90-day investment horizon Universal Health Services is expected to generate 1.24 times more return on investment than National HealthCare. However, Universal Health is 1.24 times more volatile than National HealthCare. It trades about 0.04 of its potential returns per unit of risk. National HealthCare is currently generating about -0.13 per unit of risk. If you would invest  17,817  in Universal Health Services on December 30, 2024 and sell it today you would earn a total of  801.00  from holding Universal Health Services or generate 4.5% return on investment over 90 days.

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

Universal Health Services  vs.  National HealthCare

Universal Health Services

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Health Services are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical indicators, Universal Health is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

National HealthCare

Risk-Adjusted Performance

Very Weak

Over the last 90 days National HealthCare 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 rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Universal Health and National HealthCare

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

The idea behind Universal Health Services and National HealthCare 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.