Correlation Between Universal Health and Ke Holdings

Can any of the company-specific risk be diversified away by investing in both Universal Health and Ke Holdings 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 Ke Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Universal Health Realty and Ke Holdings, you can compare the effects of market volatilities on Universal Health and Ke Holdings 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 Ke Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Health and Ke Holdings.

Diversification Opportunities for Universal Health and Ke Holdings

0.69

Correlation Coefficient

Universal Health  Ke Holdings

Poor diversification

The 3 months correlation between Universal and BEKE is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Realty and Ke Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ke Holdings 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 Realty are associated (or correlated) with Ke Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ke Holdings has no effect on the direction of Universal Health i.e., Universal Health and Ke Holdings go up and down completely randomly.

Pair Corralation between Universal Health and Ke Holdings

Considering the 90-day investment horizon Universal Health Realty is expected to generate 1.06 times more return on investment than Ke Holdings. However, Universal Health is 1.06 times more volatile than Ke Holdings. It trades about -0.11 of its potential returns per unit of risk. Ke Holdings is currently generating about -0.41 per unit of risk. If you would invest  3,845  in Universal Health Realty on October 17, 2024 and sell it today you would lose (135.00) from holding Universal Health Realty or give up 3.51% of portfolio value over 90 days.

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

Universal Health Realty  vs.  Ke Holdings

Universal Health Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Health Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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.

Ke Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ke Holdings 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 forward-looking signals remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Universal Health and Ke Holdings

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

The idea behind Universal Health Realty and Ke Holdings 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.