Correlation Between Universal Health and American Mutual

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

Diversification Opportunities for Universal Health and American Mutual

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Universal and American is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and American Mutual in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Mutual 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 American Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Mutual has no effect on the direction of Universal Health i.e., Universal Health and American Mutual go up and down completely randomly.

Pair Corralation between Universal Health and American Mutual

Considering the 90-day investment horizon Universal Health Services is expected to under-perform the American Mutual. In addition to that, Universal Health is 2.31 times more volatile than American Mutual. It trades about -0.07 of its total potential returns per unit of risk. American Mutual is currently generating about -0.01 per unit of volatility. If you would invest  4,813  in American Mutual on June 26, 2022 and sell it today you would lose (201.00)  from holding American Mutual or give up 4.18% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.6%
ValuesDaily Returns

Universal Health Services  vs.  American Mutual

 Performance (%) 
       Timeline  
Universal Health Services 
Universal Performance
0 of 100
Over the last 90 days Universal Health Services has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in October 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Universal Price Channel

American Mutual 
American Performance
0 of 100
Over the last 90 days American Mutual has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, American Mutual is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

American Price Channel

Universal Health and American Mutual Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Universal Health and American Mutual

The main advantage of trading using opposite Universal Health and American Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Health position performs unexpectedly, American Mutual 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 American Mutual will offset losses from the drop in American Mutual's long position.
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The idea behind Universal Health Services and American Mutual 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.
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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