Correlation Between Universal Health and Sealed Air
Can any of the company-specific risk be diversified away by investing in both Universal Health and Sealed Air 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 Sealed Air 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 Sealed Air Corp, you can compare the effects of market volatilities on Universal Health and Sealed Air 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 Sealed Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Health and Sealed Air.
Diversification Opportunities for Universal Health and Sealed Air
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Universal and Sealed is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and Sealed Air Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sealed Air 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 Sealed Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sealed Air Corp has no effect on the direction of Universal Health i.e., Universal Health and Sealed Air go up and down completely randomly.
Pair Corralation between Universal Health and Sealed Air
Assuming the 90 days trading horizon Universal Health Services is expected to generate 0.85 times more return on investment than Sealed Air. However, Universal Health Services is 1.18 times less risky than Sealed Air. It trades about 0.04 of its potential returns per unit of risk. Sealed Air Corp is currently generating about -0.02 per unit of risk. If you would invest 13,994 in Universal Health Services on September 24, 2024 and sell it today you would earn a total of 4,023 from holding Universal Health Services or generate 28.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.77% |
| Values | Daily Returns |
Universal Health Services vs. Sealed Air Corp
Performance |
| Timeline |
| Universal Health Services |
| Sealed Air Corp |
Universal Health and Sealed Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Health and Sealed Air
The main advantage of trading using opposite Universal Health and Sealed Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Health position performs unexpectedly, Sealed Air 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 Sealed Air will offset losses from the drop in Sealed Air's long position.| Universal Health vs. Uniper SE | Universal Health vs. Mulberry Group PLC | Universal Health vs. London Security Plc | Universal Health vs. Triad Group PLC |
| Sealed Air vs. Uniper SE | Sealed Air vs. Mulberry Group PLC | Sealed Air vs. London Security Plc | Sealed Air vs. Triad Group PLC |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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