Correlation Between Universal Health and New Residential
Can any of the company-specific risk be diversified away by investing in both Universal Health and New Residential 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 New Residential 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 New Residential Investment, you can compare the effects of market volatilities on Universal Health and New Residential 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 New Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Health and New Residential.
Diversification Opportunities for Universal Health and New Residential
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Universal and New is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve 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 New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of Universal Health i.e., Universal Health and New Residential go up and down completely randomly.
Pair Corralation between Universal Health and New Residential
Assuming the 90 days trading horizon Universal Health Services is expected to under-perform the New Residential. In addition to that, Universal Health is 1.37 times more volatile than New Residential Investment. It trades about -0.1 of its total potential returns per unit of risk. New Residential Investment is currently generating about 0.41 per unit of volatility. If you would invest 1,043 in New Residential Investment on September 4, 2024 and sell it today you would earn a total of 80.00 from holding New Residential Investment or generate 7.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Universal Health Services vs. New Residential Investment
Performance |
| Timeline |
| Universal Health Services |
| New Residential Inve |
Universal Health and New Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Health and New Residential
The main advantage of trading using opposite Universal Health and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Health position performs unexpectedly, New Residential 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 New Residential will offset losses from the drop in New Residential's long position.| Universal Health vs. Samsung Electronics Co | Universal Health vs. Samsung Electronics Co | Universal Health vs. Hyundai Motor | Universal Health vs. Toyota Motor Corp |
| New Residential vs. Samsung Electronics Co | New Residential vs. Samsung Electronics Co | New Residential vs. Hyundai Motor | New Residential vs. Toyota Motor Corp |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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