Correlation Between Universal Health and Amedisys

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

Diversification Opportunities for Universal Health and Amedisys

0.41

Correlation Coefficient

Universal Health  Amedisys

Very weak diversification

The 3 months correlation between Universal and Amedisys is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and Amedisys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amedisys 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 Amedisys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amedisys has no effect on the direction of Universal Health i.e., Universal Health and Amedisys go up and down completely randomly.

Pair Corralation between Universal Health and Amedisys

Considering the 90-day investment horizon Universal Health Services is expected to generate 1.71 times more return on investment than Amedisys. However, Universal Health is 1.71 times more volatile than Amedisys. It trades about 0.16 of its potential returns per unit of risk. Amedisys is currently generating about -0.01 per unit of risk. If you would invest  16,822  in Universal Health Services on March 12, 2024 and sell it today you would earn a total of  1,931  from holding Universal Health Services or generate 11.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Universal Health Services  vs.  Amedisys

Universal Health Services

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Health Services are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, Universal Health may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Amedisys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amedisys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Amedisys is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Universal Health and Amedisys

The main advantage of trading using opposite Universal Health and Amedisys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Health position performs unexpectedly, Amedisys 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 Amedisys will offset losses from the drop in Amedisys' long position.

The idea behind Universal Health Services and Amedisys 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.