Correlation Between Universal Health and LTC Properties

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

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

Diversification Opportunities for Universal Health and LTC Properties

-0.19

Correlation Coefficient

Universal Health  LTC Properties

Good diversification

The 3 months correlation between Universal and LTC is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Realty and LTC Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LTC Properties 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 Realty are associated (or correlated) with LTC Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LTC Properties has no effect on the direction of Universal Health i.e., Universal Health and LTC Properties go up and down completely randomly.

Pair Corralation between Universal Health and LTC Properties

Assuming the 90 days horizon Universal Health Realty is expected to generate 1.72 times more return on investment than LTC Properties. However, Universal Health is 1.72 times more volatile than LTC Properties. It trades about 0.24 of its potential returns per unit of risk. LTC Properties is currently generating about 0.21 per unit of risk. If you would invest  3,594  in Universal Health Realty on September 4, 2024 and sell it today you would earn a total of  364.00  from holding Universal Health Realty or generate 10.13% return on investment over 90 days.

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

Universal Health Realty  vs.  LTC Properties

Universal Health Realty

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Health Realty are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Universal Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

LTC Properties

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LTC Properties are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, LTC Properties reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Health and LTC Properties

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

The idea behind Universal Health Realty and LTC Properties 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.