Correlation Between Universal Health and Forestar

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

Diversification Opportunities for Universal Health and Forestar

0.74

Correlation Coefficient

Universal Health  Forestar

Poor diversification

The 3 months correlation between Universal and Forestar is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Realty and Forestar Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forestar Group 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 Forestar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forestar Group has no effect on the direction of Universal Health i.e., Universal Health and Forestar go up and down completely randomly.

Pair Corralation between Universal Health and Forestar

Considering the 90-day investment horizon Universal Health Realty is expected to generate 1.02 times more return on investment than Forestar. However, Universal Health is 1.02 times more volatile than Forestar Group. It trades about -0.4 of its potential returns per unit of risk. Forestar Group is currently generating about -0.5 per unit of risk. If you would invest  4,142  in Universal Health Realty on September 30, 2024 and sell it today you would lose (485.00) from holding Universal Health Realty or give up 11.71% 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.  Forestar Group

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 unfluctuating 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.

Forestar Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forestar Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Universal Health and Forestar

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

The idea behind Universal Health Realty and Forestar 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.