Correlation Between Universal Health and UnitedHealth Group

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Can any of the company-specific risk be diversified away by investing in both Universal Health and UnitedHealth Group 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 UnitedHealth Group 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 UnitedHealth Group Incorporated, you can compare the effects of market volatilities on Universal Health and UnitedHealth Group 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 UnitedHealth Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Health and UnitedHealth Group.

Diversification Opportunities for Universal Health and UnitedHealth Group

-0.78
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Universal and UnitedHealth is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and UnitedHealth Group Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group 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 UnitedHealth Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UnitedHealth Group has no effect on the direction of Universal Health i.e., Universal Health and UnitedHealth Group go up and down completely randomly.

Pair Corralation between Universal Health and UnitedHealth Group

Considering the 90-day investment horizon Universal Health Services is expected to generate 1.47 times more return on investment than UnitedHealth Group. However, Universal Health is 1.47 times more volatile than UnitedHealth Group Incorporated. It trades about 0.03 of its potential returns per unit of risk. UnitedHealth Group Incorporated is currently generating about 0.0 per unit of risk. If you would invest  14,422  in Universal Health Services on December 29, 2023 and sell it today you would earn a total of  3,763  from holding Universal Health Services or generate 26.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Universal Health Services  vs.  UnitedHealth Group Incorporate

 Performance 
       Timeline  
Universal Health Services 

Risk-Adjusted Performance

17 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Universal Health Services are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, Universal Health unveiled solid returns over the last few months and may actually be approaching a breakup point.
UnitedHealth Group 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days UnitedHealth Group Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, UnitedHealth Group is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Universal Health and UnitedHealth Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Universal Health and UnitedHealth Group

The main advantage of trading using opposite Universal Health and UnitedHealth Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Health position performs unexpectedly, UnitedHealth Group 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 UnitedHealth Group will offset losses from the drop in UnitedHealth Group's long position.
The idea behind Universal Health Services and UnitedHealth Group Incorporated pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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