Correlation Between Universal Health and Prestige Brand
Can any of the company-specific risk be diversified away by investing in both Universal Health and Prestige Brand 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 Prestige Brand 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 Prestige Brand Holdings, you can compare the effects of market volatilities on Universal Health and Prestige Brand 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 Prestige Brand. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Health and Prestige Brand.
Diversification Opportunities for Universal Health and Prestige Brand
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Universal and Prestige is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and Prestige Brand Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prestige Brand Holdings 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 Prestige Brand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prestige Brand Holdings has no effect on the direction of Universal Health i.e., Universal Health and Prestige Brand go up and down completely randomly.
Pair Corralation between Universal Health and Prestige Brand
Considering the 90-day investment horizon Universal Health Services is expected to under-perform the Prestige Brand. In addition to that, Universal Health is 1.89 times more volatile than Prestige Brand Holdings. It trades about -0.1 of its total potential returns per unit of risk. Prestige Brand Holdings is currently generating about 0.29 per unit of volatility. If you would invest 7,210 in Prestige Brand Holdings on August 31, 2024 and sell it today you would earn a total of 1,207 from holding Prestige Brand Holdings or generate 16.74% 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. Prestige Brand Holdings
Performance |
| Timeline |
| Universal Health Services |
| Prestige Brand Holdings |
Universal Health and Prestige Brand Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Health and Prestige Brand
The main advantage of trading using opposite Universal Health and Prestige Brand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Health position performs unexpectedly, Prestige Brand 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 Prestige Brand will offset losses from the drop in Prestige Brand'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 |
| Prestige Brand vs. Evotec SE ADR | Prestige Brand vs. Supernus Pharmaceuticals | Prestige Brand vs. Collegium Pharmaceutical | Prestige Brand vs. Regencell Bioscience Holdings |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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