Correlation Between Universal Health and Laboratory
Can any of the company-specific risk be diversified away by investing in both Universal Health and Laboratory 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 Laboratory 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 Laboratory of, you can compare the effects of market volatilities on Universal Health and Laboratory 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 Laboratory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Health and Laboratory.
Diversification Opportunities for Universal Health and Laboratory
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Universal and Laboratory is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and Laboratory of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laboratory 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 Laboratory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laboratory has no effect on the direction of Universal Health i.e., Universal Health and Laboratory go up and down completely randomly.
Pair Corralation between Universal Health and Laboratory
Considering the 90-day investment horizon Universal Health Services is expected to generate 1.31 times more return on investment than Laboratory. However, Universal Health is 1.31 times more volatile than Laboratory of. It trades about 0.05 of its potential returns per unit of risk. Laboratory of is currently generating about 0.03 per unit of risk. If you would invest 14,364 in Universal Health Services on August 27, 2024 and sell it today you would earn a total of 5,557 from holding Universal Health Services or generate 38.69% 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. Laboratory of
Performance |
| Timeline |
| Universal Health Services |
| Laboratory |
Universal Health and Laboratory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Health and Laboratory
The main advantage of trading using opposite Universal Health and Laboratory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Health position performs unexpectedly, Laboratory 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 Laboratory will offset losses from the drop in Laboratory'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 |
| Laboratory vs. Quest Diagnostics Incorporated | Laboratory vs. Waters | Laboratory vs. Universal Health Services | Laboratory vs. Humana Inc |
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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