Correlation Between Snap and Universal Health
Can any of the company-specific risk be diversified away by investing in both Snap 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 Snap and Universal Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Universal Health Realty, you can compare the effects of market volatilities on Snap 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 Snap with a short position of Universal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Universal Health.
Diversification Opportunities for Snap and Universal Health
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Snap and Universal is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Universal Health Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Health Realty and Snap 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 Snap Inc 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 Realty has no effect on the direction of Snap i.e., Snap and Universal Health go up and down completely randomly.
Pair Corralation between Snap and Universal Health
Given the investment horizon of 90 days Snap Inc is expected to generate 2.32 times more return on investment than Universal Health. However, Snap is 2.32 times more volatile than Universal Health Realty. It trades about 0.1 of its potential returns per unit of risk. Universal Health Realty is currently generating about 0.22 per unit of risk. If you would invest 1,071 in Snap Inc on August 29, 2024 and sell it today you would earn a total of 90.00 from holding Snap Inc or generate 8.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. Universal Health Realty
Performance |
| Timeline |
| Snap Inc |
| Universal Health Realty |
Snap and Universal Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Universal Health
The main advantage of trading using opposite Snap and Universal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap 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 Snap Inc and Universal Health Realty 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. Sabra Health Care | Universal Health vs. Superior Plus Corp | Universal Health vs. NMI Holdings | Universal Health vs. SIVERS SEMICONDUCTORS AB |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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