Correlation Between Universal Health and Volkswagen
Can any of the company-specific risk be diversified away by investing in both Universal Health and Volkswagen 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 Volkswagen 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 Volkswagen AG, you can compare the effects of market volatilities on Universal Health and Volkswagen 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 Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Health and Volkswagen.
Diversification Opportunities for Universal Health and Volkswagen
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Universal and Volkswagen is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG has no effect on the direction of Universal Health i.e., Universal Health and Volkswagen go up and down completely randomly.
Pair Corralation between Universal Health and Volkswagen
Assuming the 90 days trading horizon Universal Health Services is expected to generate 1.21 times more return on investment than Volkswagen. However, Universal Health is 1.21 times more volatile than Volkswagen AG. It trades about 0.05 of its potential returns per unit of risk. Volkswagen AG is currently generating about -0.04 per unit of risk. If you would invest 14,060 in Universal Health Services on September 12, 2024 and sell it today you would earn a total of 5,227 from holding Universal Health Services or generate 37.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 85.31% |
| Values | Daily Returns |
Universal Health Services vs. Volkswagen AG
Performance |
| Timeline |
| Universal Health Services |
| Volkswagen AG |
Universal Health and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Health and Volkswagen
The main advantage of trading using opposite Universal Health and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Health position performs unexpectedly, Volkswagen 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 Volkswagen will offset losses from the drop in Volkswagen's long position.| Universal Health vs. Hong Kong Land | Universal Health vs. Neometals | Universal Health vs. Coor Service Management | Universal Health vs. Fidelity Sustainable USD |
| Volkswagen vs. Universal Health Services | Volkswagen vs. Induction Healthcare Group | Volkswagen vs. Omega Healthcare Investors | Volkswagen vs. Eco Animal Health |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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