Correlation Between HCA Healthcare and Universal Health
Can any of the company-specific risk be diversified away by investing in both HCA Healthcare 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 HCA Healthcare and Universal Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HCA Healthcare and Universal Health Services, you can compare the effects of market volatilities on HCA Healthcare 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 HCA Healthcare with a short position of Universal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of HCA Healthcare and Universal Health.
Diversification Opportunities for HCA Healthcare and Universal Health
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HCA and Universal is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding HCA Healthcare 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 HCA Healthcare 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 HCA Healthcare 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 HCA Healthcare i.e., HCA Healthcare and Universal Health go up and down completely randomly.
Pair Corralation between HCA Healthcare and Universal Health
Assuming the 90 days trading horizon HCA Healthcare is expected to under-perform the Universal Health. In addition to that, HCA Healthcare is 1.11 times more volatile than Universal Health Services. It trades about -0.16 of its total potential returns per unit of risk. Universal Health Services is currently generating about 0.05 per unit of volatility. If you would invest 19,000 in Universal Health Services on August 31, 2024 and sell it today you would earn a total of 300.00 from holding Universal Health Services or generate 1.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HCA Healthcare vs. Universal Health Services
Performance |
| Timeline |
| HCA Healthcare |
| Universal Health Services |
HCA Healthcare and Universal Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HCA Healthcare and Universal Health
The main advantage of trading using opposite HCA Healthcare and Universal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HCA Healthcare 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.| HCA Healthcare vs. QURATE RETAIL INC | HCA Healthcare vs. Direct Line Insurance | HCA Healthcare vs. LIFENET INSURANCE CO | HCA Healthcare vs. Burlington Stores |
| Universal Health vs. BANKINTER ADR 2007 | Universal Health vs. The Hanover Insurance | Universal Health vs. DATANG INTL POW | Universal Health vs. CDN IMPERIAL BANK |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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