Correlation Between Boston Properties and Universal Health

Can any of the company-specific risk be diversified away by investing in both Boston Properties 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 Boston Properties and Universal Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Boston Properties and Universal Health Realty, you can compare the effects of market volatilities on Boston Properties 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 Boston Properties with a short position of Universal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Properties and Universal Health.

Diversification Opportunities for Boston Properties and Universal Health

-0.37

Correlation Coefficient

Boston Properties  Universal Health

Very good diversification

The 3 months correlation between Boston and Universal is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Boston Properties and Universal Health Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Health Realty and Boston Properties 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 Boston Properties 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 Realty has no effect on the direction of Boston Properties i.e., Boston Properties and Universal Health go up and down completely randomly.

Pair Corralation between Boston Properties and Universal Health

Considering the 90-day investment horizon Boston Properties is expected to generate 1.04 times more return on investment than Universal Health. However, Boston Properties is 1.04 times more volatile than Universal Health Realty. It trades about 0.12 of its potential returns per unit of risk. Universal Health Realty is currently generating about -0.04 per unit of risk. If you would invest  7,431  in Boston Properties on August 30, 2024 and sell it today you would earn a total of  855.00  from holding Boston Properties or generate 11.51% return on investment over 90 days.

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

Boston Properties  vs.  Universal Health Realty

Boston Properties

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Properties are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Boston Properties may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Universal Health Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Health Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, Universal Health is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Boston Properties and Universal Health

The main advantage of trading using opposite Boston Properties and Universal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Properties 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.

The idea behind Boston Properties and Universal Health Realty 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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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.