Correlation Between Universal Health and Associated British
Can any of the company-specific risk be diversified away by investing in both Universal Health and Associated British 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 Associated British 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 Associated British Foods, you can compare the effects of market volatilities on Universal Health and Associated British 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 Associated British. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Health and Associated British.
Diversification Opportunities for Universal Health and Associated British
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Universal and Associated is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods 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 Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of Universal Health i.e., Universal Health and Associated British go up and down completely randomly.
Pair Corralation between Universal Health and Associated British
Assuming the 90 days trading horizon Universal Health Services is expected to generate 1.39 times more return on investment than Associated British. However, Universal Health is 1.39 times more volatile than Associated British Foods. It trades about 0.05 of its potential returns per unit of risk. Associated British Foods is currently generating about 0.02 per unit of risk. If you would invest 15,049 in Universal Health Services on September 12, 2024 and sell it today you would earn a total of 4,238 from holding Universal Health Services or generate 28.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 88.17% |
| Values | Daily Returns |
Universal Health Services vs. Associated British Foods
Performance |
| Timeline |
| Universal Health Services |
| Associated British Foods |
Universal Health and Associated British Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Health and Associated British
The main advantage of trading using opposite Universal Health and Associated British positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Health position performs unexpectedly, Associated British 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 Associated British will offset losses from the drop in Associated British'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 |
| Associated British vs. Inspiration Healthcare Group | Associated British vs. Universal Health Services | Associated British vs. Naturhouse Health SA | Associated British vs. Gamma Communications 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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