Correlation Between CN MODERN and Universal Health
Can any of the company-specific risk be diversified away by investing in both CN MODERN 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 CN MODERN and Universal Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CN MODERN DAIRY and Universal Health Realty, you can compare the effects of market volatilities on CN MODERN 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 CN MODERN with a short position of Universal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of CN MODERN and Universal Health.
Diversification Opportunities for CN MODERN and Universal Health
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 07M and Universal is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding CN MODERN DAIRY and Universal Health Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Health Realty and CN MODERN 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 CN MODERN DAIRY 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 Realty has no effect on the direction of CN MODERN i.e., CN MODERN and Universal Health go up and down completely randomly.
Pair Corralation between CN MODERN and Universal Health
Assuming the 90 days trading horizon CN MODERN DAIRY is expected to generate 2.73 times more return on investment than Universal Health. However, CN MODERN is 2.73 times more volatile than Universal Health Realty. It trades about 0.14 of its potential returns per unit of risk. Universal Health Realty is currently generating about 0.28 per unit of risk. If you would invest 9.95 in CN MODERN DAIRY on November 8, 2024 and sell it today you would earn a total of 1.05 from holding CN MODERN DAIRY or generate 10.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CN MODERN DAIRY vs. Universal Health Realty
Performance |
| Timeline |
| CN MODERN DAIRY |
| Universal Health Realty |
CN MODERN and Universal Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CN MODERN and Universal Health
The main advantage of trading using opposite CN MODERN and Universal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CN MODERN 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.| CN MODERN vs. IMPERIAL TOBACCO | CN MODERN vs. Scandinavian Tobacco Group | CN MODERN vs. GREENX METALS LTD | CN MODERN vs. CORNISH METALS INC |
| Universal Health vs. China Communications Services | Universal Health vs. COMBA TELECOM SYST | Universal Health vs. HUTCHISON TELECOMM | Universal Health vs. Singapore Telecommunications Limited |
Check out your portfolio center.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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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