Correlation Between Tenet Healthcare and Universal Health
Can any of the company-specific risk be diversified away by investing in both Tenet Healthcare and Universal 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 Tenet Healthcare and Universal Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tenet Healthcare and Universal Health Services, you can compare the effects of market volatilities on Tenet Healthcare and Universal 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 Tenet Healthcare with a short position of Universal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tenet Healthcare and Universal Health.
Diversification Opportunities for Tenet Healthcare and Universal Health
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Tenet and Universal is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Tenet Healthcare and Universal Health Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Health Services and Tenet Healthcare 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 Tenet Healthcare are associated (or correlated) with Universal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Health Services has no effect on the direction of Tenet Healthcare i.e., Tenet Healthcare and Universal Health go up and down completely randomly.
Pair Corralation between Tenet Healthcare and Universal Health
Considering the 90-day investment horizon Tenet Healthcare is expected to generate 1.56 times more return on investment than Universal Health. However, Tenet Healthcare is 1.56 times more volatile than Universal Health Services. It trades about 0.03 of its potential returns per unit of risk. Universal Health Services is currently generating about 0.04 per unit of risk. If you would invest 7,500 in Tenet Healthcare on January 26, 2024 and sell it today you would earn a total of 2,326 from holding Tenet Healthcare or generate 31.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tenet Healthcare vs. Universal Health Services
Performance |
| Timeline |
| Tenet Healthcare |
| Universal Health Services |
Tenet Healthcare and Universal Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tenet Healthcare and Universal Health
The main advantage of trading using opposite Tenet Healthcare and Universal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tenet Healthcare position performs unexpectedly, Universal 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 Universal Health will offset losses from the drop in Universal Health's long position.| Tenet Healthcare vs. Acadia Healthcare | Tenet Healthcare vs. HCA Holdings | Tenet Healthcare vs. US Physicalrapy | Tenet Healthcare vs. DaVita HealthCare Partners |
| Universal Health vs. The Ensign Group | Universal Health vs. Addus HomeCare | Universal Health vs. Encompass Health Corp | Universal Health vs. Surgery Partners |
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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