Correlation Between Volkswagen and Universal Health
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Universal Health 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 Volkswagen and Universal Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and Universal Health Services, you can compare the effects of market volatilities on Volkswagen and Universal Health 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 Volkswagen with a short position of Universal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Universal Health.
Diversification Opportunities for Volkswagen and Universal Health
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Volkswagen and Universal is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Universal Health Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Health Services and Volkswagen 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 Volkswagen AG are associated (or correlated) with Universal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Health Services has no effect on the direction of Volkswagen i.e., Volkswagen and Universal Health go up and down completely randomly.
Pair Corralation between Volkswagen and Universal Health
Assuming the 90 days trading horizon Volkswagen AG is expected to under-perform the Universal Health. But the stock apears to be less risky and, when comparing its historical volatility, Volkswagen AG is 1.16 times less risky than Universal Health. The stock trades about -0.07 of its potential returns per unit of risk. The Universal Health Services is currently generating about 0.05 of returns per unit of risk over similar time horizon. 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 | Strong |
| Accuracy | 88.17% |
| Values | Daily Returns |
Volkswagen AG vs. Universal Health Services
Performance |
| Timeline |
| Volkswagen AG |
| Universal Health Services |
Volkswagen and Universal Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Universal Health
The main advantage of trading using opposite Volkswagen and Universal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Universal Health 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 Universal Health will offset losses from the drop in Universal Health's long position.| Volkswagen vs. Universal Health Services | Volkswagen vs. Induction Healthcare Group | Volkswagen vs. Omega Healthcare Investors | Volkswagen vs. Eco Animal Health |
| Universal Health vs. Hong Kong Land | Universal Health vs. Neometals | Universal Health vs. Coor Service Management | Universal Health vs. Fidelity Sustainable USD |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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