Correlation Between Universal Health and Community Health
Can any of the company-specific risk be diversified away by investing in both Universal Health and Community 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 Universal Health and Community Health 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 Community Health Systems, you can compare the effects of market volatilities on Universal Health and Community 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 Universal Health with a short position of Community Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Health and Community Health.
Diversification Opportunities for Universal Health and Community Health
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Universal and Community is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and Community Health Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Health Systems 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 Community Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Health Systems has no effect on the direction of Universal Health i.e., Universal Health and Community Health go up and down completely randomly.
Pair Corralation between Universal Health and Community Health
Considering the 90-day investment horizon Universal Health Services is expected to generate 0.38 times more return on investment than Community Health. However, Universal Health Services is 2.62 times less risky than Community Health. It trades about 0.05 of its potential returns per unit of risk. Community Health Systems is currently generating about 0.01 per unit of risk. If you would invest 15,272 in Universal Health Services on August 28, 2024 and sell it today you would earn a total of 4,649 from holding Universal Health Services or generate 30.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Health Services vs. Community Health Systems
Performance |
| Timeline |
| Universal Health Services |
| Community Health Systems |
Universal Health and Community Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Health and Community Health
The main advantage of trading using opposite Universal Health and Community Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Health position performs unexpectedly, Community 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 Community Health will offset losses from the drop in Community Health's long position.| Universal Health vs. The Ensign Group | Universal Health vs. Addus HomeCare | Universal Health vs. Encompass Health Corp | Universal Health vs. Surgery Partners |
| Community Health vs. Universal Health Services | Community Health vs. HCA Holdings | Community Health vs. Surgery Partners | Community Health vs. Acadia Healthcare |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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