Correlation Between Universal Health and National Beverage
Can any of the company-specific risk be diversified away by investing in both Universal Health and National Beverage 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 National Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Health Services and National Beverage Corp, you can compare the effects of market volatilities on Universal Health and National Beverage 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 National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Health and National Beverage.
Diversification Opportunities for Universal Health and National Beverage
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Universal and National is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage Corp 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 Services are associated (or correlated) with National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of Universal Health i.e., Universal Health and National Beverage go up and down completely randomly.
Pair Corralation between Universal Health and National Beverage
Assuming the 90 days trading horizon Universal Health Services is expected to generate 0.48 times more return on investment than National Beverage. However, Universal Health Services is 2.07 times less risky than National Beverage. It trades about 0.07 of its potential returns per unit of risk. National Beverage Corp is currently generating about 0.02 per unit of risk. If you would invest 12,593 in Universal Health Services on August 30, 2024 and sell it today you would earn a total of 7,735 from holding Universal Health Services or generate 61.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 96.55% |
| Values | Daily Returns |
Universal Health Services vs. National Beverage Corp
Performance |
| Timeline |
| Universal Health Services |
| National Beverage Corp |
Universal Health and National Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Health and National Beverage
The main advantage of trading using opposite Universal Health and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Health position performs unexpectedly, National Beverage 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 National Beverage will offset losses from the drop in National Beverage's long position.| Universal Health vs. Lendinvest PLC | Universal Health vs. Neometals | Universal Health vs. Albion Technology General | Universal Health vs. Jupiter Fund Management |
| National Beverage vs. Lendinvest PLC | National Beverage vs. Neometals | National Beverage vs. Albion Technology General | National Beverage vs. Jupiter Fund Management |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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