Correlation Between Universal Health and Yellow Pages

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

Diversification Opportunities for Universal Health and Yellow Pages

-0.48

Correlation Coefficient

Universal Health  Yellow Pages

Very good diversification

The 3 months correlation between Universal and Yellow is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Realty and Yellow Pages Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yellow Pages Limited 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 Yellow Pages. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yellow Pages Limited has no effect on the direction of Universal Health i.e., Universal Health and Yellow Pages go up and down completely randomly.

Pair Corralation between Universal Health and Yellow Pages

Assuming the 90 days horizon Universal Health Realty is expected to generate 0.61 times more return on investment than Yellow Pages. However, Universal Health Realty is 1.63 times less risky than Yellow Pages. It trades about 0.09 of its potential returns per unit of risk. Yellow Pages Limited is currently generating about -0.01 per unit of risk. If you would invest  3,424  in Universal Health Realty on December 27, 2024 and sell it today you would earn a total of  247.00  from holding Universal Health Realty or generate 7.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Universal Health Realty  vs.  Yellow Pages Limited

Universal Health Realty

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Health Realty are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Universal Health may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Yellow Pages Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Yellow Pages Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Yellow Pages is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Universal Health and Yellow Pages

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

The idea behind Universal Health Realty and Yellow Pages Limited 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.