Correlation Between Universal Health and Aberdeen Diversified

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Can any of the company-specific risk be diversified away by investing in both Universal Health and Aberdeen Diversified 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 Aberdeen Diversified 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 Aberdeen Diversified Income, you can compare the effects of market volatilities on Universal Health and Aberdeen Diversified 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 Aberdeen Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Health and Aberdeen Diversified.

Diversification Opportunities for Universal Health and Aberdeen Diversified

0.22
  Correlation Coefficient

Modest diversification

The 3 months correlation between Universal and Aberdeen is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and Aberdeen Diversified Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Diversified 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 Aberdeen Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Diversified has no effect on the direction of Universal Health i.e., Universal Health and Aberdeen Diversified go up and down completely randomly.

Pair Corralation between Universal Health and Aberdeen Diversified

Assuming the 90 days trading horizon Universal Health Services is expected to generate 1.34 times more return on investment than Aberdeen Diversified. However, Universal Health is 1.34 times more volatile than Aberdeen Diversified Income. It trades about 0.06 of its potential returns per unit of risk. Aberdeen Diversified Income is currently generating about 0.01 per unit of risk. If you would invest  13,281  in Universal Health Services on September 4, 2024 and sell it today you would earn a total of  7,100  from holding Universal Health Services or generate 53.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy84.74%
ValuesDaily Returns

Universal Health Services  vs.  Aberdeen Diversified Income

 Performance 
       Timeline  
Universal Health Services 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Universal Health Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Aberdeen Diversified 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Aberdeen Diversified Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Aberdeen Diversified is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Universal Health and Aberdeen Diversified Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Universal Health and Aberdeen Diversified

The main advantage of trading using opposite Universal Health and Aberdeen Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Health position performs unexpectedly, Aberdeen Diversified 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 Aberdeen Diversified will offset losses from the drop in Aberdeen Diversified's long position.
The idea behind Universal Health Services and Aberdeen Diversified Income pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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