Correlation Between United States and Universal Health

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

By analyzing existing cross correlation between United States Steel and Universal Health Services,, you can compare the effects of market volatilities on United States and Universal 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 United States with a short position of Universal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Universal Health.

Diversification Opportunities for United States and Universal Health

0.19

Correlation Coefficient

United States  Universal Health

Average diversification

The 3 months correlation between United and Universal is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Universal Health Services, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Health Ser and United States 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 United States Steel are associated (or correlated) with Universal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Health Ser has no effect on the direction of United States i.e., United States and Universal Health go up and down completely randomly.

Pair Corralation between United States and Universal Health

Assuming the 90 days trading horizon United States Steel is expected to under-perform the Universal Health. But the stock apears to be less risky and, when comparing its historical volatility, United States Steel is 1.26 times less risky than Universal Health. The stock trades about 0.0 of its potential returns per unit of risk. The Universal Health Services, is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  18,835  in Universal Health Services, on October 9, 2024 and sell it today you would earn a total of  10,558  from holding Universal Health Services, or generate 56.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.87%
Values	Daily Returns

United States Steel  vs.  Universal Health Services,

United States Steel

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, United States may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Universal Health Ser

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. Despite somewhat strong technical indicators, Universal Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United States and Universal Health

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

The idea behind United States Steel and Universal Health Services, 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.