Correlation Between Varex Imaging and Universal Health

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

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

Diversification Opportunities for Varex Imaging and Universal Health

-0.72

Correlation Coefficient

Varex Imaging  Universal Health

Pay attention - limited upside

The 3 months correlation between Varex and Universal is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Varex Imaging Corp and Universal Health Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Health Services and Varex Imaging 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 Varex Imaging Corp 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 Services has no effect on the direction of Varex Imaging i.e., Varex Imaging and Universal Health go up and down completely randomly.

Pair Corralation between Varex Imaging and Universal Health

Given the investment horizon of 90 days Varex Imaging Corp is expected to generate 1.61 times more return on investment than Universal Health. However, Varex Imaging is 1.61 times more volatile than Universal Health Services. It trades about 0.15 of its potential returns per unit of risk. Universal Health Services is currently generating about -0.11 per unit of risk. If you would invest  1,248  in Varex Imaging Corp on August 30, 2024 and sell it today you would earn a total of  405.00  from holding Varex Imaging Corp or generate 32.45% return on investment over 90 days.

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

Varex Imaging Corp  vs.  Universal Health Services

Varex Imaging Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Varex Imaging Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Varex Imaging showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Varex Imaging and Universal Health

The main advantage of trading using opposite Varex Imaging and Universal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Varex Imaging 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 Varex Imaging Corp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.