Correlation Between Fresenius Medical and Universal Health

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

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

Diversification Opportunities for Fresenius Medical and Universal Health

-0.47

Correlation Coefficient

Fresenius Medical  Universal Health

Very good diversification

The 3 months correlation between Fresenius and Universal is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius Medical Care 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 Fresenius Medical 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 Fresenius Medical Care 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 Fresenius Medical i.e., Fresenius Medical and Universal Health go up and down completely randomly.

Pair Corralation between Fresenius Medical and Universal Health

Considering the 90-day investment horizon Fresenius Medical Care is expected to generate 0.86 times more return on investment than Universal Health. However, Fresenius Medical Care is 1.16 times less risky than Universal Health. It trades about 0.15 of its potential returns per unit of risk. Universal Health Services is currently generating about -0.1 per unit of risk. If you would invest  1,920  in Fresenius Medical Care on August 31, 2024 and sell it today you would earn a total of  328.00  from holding Fresenius Medical Care or generate 17.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Fresenius Medical Care  vs.  Universal Health Services

Fresenius Medical Care

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius Medical Care are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Fresenius Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Universal Health Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Health Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Fresenius Medical and Universal Health

The main advantage of trading using opposite Fresenius Medical and Universal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresenius Medical 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 Fresenius Medical Care and Universal Health Services 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.