Correlation Between Optima Health and Universal Health
Can any of the company-specific risk be diversified away by investing in both Optima Health 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 Optima Health and Universal Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Optima Health plc and Universal Health Services, you can compare the effects of market volatilities on Optima Health 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 Optima Health with a short position of Universal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optima Health and Universal Health.
Diversification Opportunities for Optima Health and Universal Health
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Optima and Universal is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Optima Health 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 Optima 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 Optima Health 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 Optima Health i.e., Optima Health and Universal Health go up and down completely randomly.
Pair Corralation between Optima Health and Universal Health
Assuming the 90 days trading horizon Optima Health plc is expected to under-perform the Universal Health. But the stock apears to be less risky and, when comparing its historical volatility, Optima Health plc is 2.06 times less risky than Universal Health. The stock trades about -0.23 of its potential returns per unit of risk. The Universal Health Services is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 20,469 in Universal Health Services on August 30, 2024 and sell it today you would lose (141.00) from holding Universal Health Services or give up 0.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Optima Health plc vs. Universal Health Services
Performance |
| Timeline |
| Optima Health plc |
| Universal Health Services |
Optima Health and Universal Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Optima Health and Universal Health
The main advantage of trading using opposite Optima Health and Universal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optima Health 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.| Optima Health vs. Toyota Motor Corp | Optima Health vs. OTP Bank Nyrt | Optima Health vs. Cognizant Technology Solutions | Optima Health vs. Lendinvest PLC |
| Universal Health vs. Tungsten West PLC | Universal Health vs. Argo Group Limited | Universal Health vs. Hardide PLC | Universal Health vs. Versarien 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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