Correlation Between Universal Health and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both Universal Health and Eastman Chemical 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 Universal Health and Eastman Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Health Services, and Eastman Chemical, you can compare the effects of market volatilities on Universal Health and Eastman Chemical 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 Universal Health with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Health and Eastman Chemical.
Diversification Opportunities for Universal Health and Eastman Chemical
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Universal and Eastman is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services, and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Universal 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 Universal Health Services, are associated (or correlated) with Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of Universal Health i.e., Universal Health and Eastman Chemical go up and down completely randomly.
Pair Corralation between Universal Health and Eastman Chemical
Assuming the 90 days trading horizon Universal Health Services, is expected to generate 13.73 times more return on investment than Eastman Chemical. However, Universal Health is 13.73 times more volatile than Eastman Chemical. It trades about 0.08 of its potential returns per unit of risk. Eastman Chemical is currently generating about 0.08 per unit of risk. If you would invest 18,872 in Universal Health Services, on November 3, 2024 and sell it today you would earn a total of 9,245 from holding Universal Health Services, or generate 48.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Health Services, vs. Eastman Chemical
Performance |
| Timeline |
| Universal Health Ser |
| Eastman Chemical |
Universal Health and Eastman Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Health and Eastman Chemical
The main advantage of trading using opposite Universal Health and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Health position performs unexpectedly, Eastman Chemical 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 Eastman Chemical will offset losses from the drop in Eastman Chemical's long position.| Universal Health vs. Brpr Corporate Offices | Universal Health vs. Paycom Software | Universal Health vs. Applied Materials, | Universal Health vs. Martin Marietta Materials, |
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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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