Correlation Between CleanTech Lithium and Universal Health
Can any of the company-specific risk be diversified away by investing in both CleanTech Lithium 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 CleanTech Lithium and Universal Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CleanTech Lithium plc and Universal Health Services, you can compare the effects of market volatilities on CleanTech Lithium 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 CleanTech Lithium with a short position of Universal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of CleanTech Lithium and Universal Health.
Diversification Opportunities for CleanTech Lithium and Universal Health
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CleanTech and Universal is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding CleanTech Lithium plc 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 CleanTech Lithium 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 CleanTech Lithium plc 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 CleanTech Lithium i.e., CleanTech Lithium and Universal Health go up and down completely randomly.
Pair Corralation between CleanTech Lithium and Universal Health
Assuming the 90 days trading horizon CleanTech Lithium plc is expected to under-perform the Universal Health. In addition to that, CleanTech Lithium is 2.7 times more volatile than Universal Health Services. It trades about -0.03 of its total potential returns per unit of risk. Universal Health Services is currently generating about 0.06 per unit of volatility. If you would invest 13,281 in Universal Health Services on September 3, 2024 and sell it today you would earn a total of 7,219 from holding Universal Health Services or generate 54.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 84.54% |
| Values | Daily Returns |
CleanTech Lithium plc vs. Universal Health Services
Performance |
| Timeline |
| CleanTech Lithium plc |
| Universal Health Services |
CleanTech Lithium and Universal Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CleanTech Lithium and Universal Health
The main advantage of trading using opposite CleanTech Lithium and Universal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CleanTech Lithium 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.The idea behind CleanTech Lithium plc and Universal Health Services 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.| Universal Health vs. AMG Advanced Metallurgical | Universal Health vs. Greenroc Mining PLC | Universal Health vs. Neometals | Universal Health vs. MT Bank Corp |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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