Correlation Between Universal Health and Regional Health

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

Diversification Opportunities for Universal Health and Regional Health

0.47

Correlation Coefficient

Universal Health  Regional Health

Very weak diversification

The 3 months correlation between Universal and Regional is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and Regional Health Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Health Prop 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 Regional Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Health Prop has no effect on the direction of Universal Health i.e., Universal Health and Regional Health go up and down completely randomly.

Pair Corralation between Universal Health and Regional Health

Considering the 90-day investment horizon Universal Health Services is expected to under-perform the Regional Health. But the stock apears to be less risky and, when comparing its historical volatility, Universal Health Services is 3.31 times less risky than Regional Health. The stock trades about -0.1 of its potential returns per unit of risk. The Regional Health Properties is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  186.00  in Regional Health Properties on August 31, 2024 and sell it today you would lose (16.00) from holding Regional Health Properties or give up 8.6% of portfolio value over 90 days.

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

Universal Health Services  vs.  Regional Health Properties

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.

Regional Health Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Regional Health Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Regional Health is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Universal Health and Regional Health

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

The idea behind Universal Health Services and Regional Health Properties 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.