Correlation Between Universal Health and Ross Stores
Can any of the company-specific risk be diversified away by investing in both Universal Health and Ross Stores 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 Ross Stores 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 Ross Stores, you can compare the effects of market volatilities on Universal Health and Ross Stores 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 Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Health and Ross Stores.
Diversification Opportunities for Universal Health and Ross Stores
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Universal and Ross is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services, and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores 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 Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of Universal Health i.e., Universal Health and Ross Stores go up and down completely randomly.
Pair Corralation between Universal Health and Ross Stores
Assuming the 90 days trading horizon Universal Health Services, is expected to generate 1.77 times more return on investment than Ross Stores. However, Universal Health is 1.77 times more volatile than Ross Stores. It trades about 0.05 of its potential returns per unit of risk. Ross Stores is currently generating about 0.07 per unit of risk. If you would invest 17,986 in Universal Health Services, on October 13, 2024 and sell it today you would earn a total of 11,407 from holding Universal Health Services, or generate 63.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 92.48% |
| Values | Daily Returns |
Universal Health Services, vs. Ross Stores
Performance |
| Timeline |
| Universal Health Ser |
| Ross Stores |
Universal Health and Ross Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Health and Ross Stores
The main advantage of trading using opposite Universal Health and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Health position performs unexpectedly, Ross Stores 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 Ross Stores will offset losses from the drop in Ross Stores' long position.| Universal Health vs. HCA Healthcare, | Universal Health vs. Hospital Mater Dei | Universal Health vs. Energisa SA | Universal Health vs. BTG Pactual Logstica |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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