Correlation Between Enhabit and Universal Health

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

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

Diversification Opportunities for Enhabit and Universal Health

0.49

Correlation Coefficient

Enhabit  Universal Health

Very weak diversification

The 3 months correlation between Enhabit and Universal is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Enhabit 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 Enhabit 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 Enhabit 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 Enhabit i.e., Enhabit and Universal Health go up and down completely randomly.

Pair Corralation between Enhabit and Universal Health

Given the investment horizon of 90 days Enhabit is expected to generate 1.29 times more return on investment than Universal Health. However, Enhabit is 1.29 times more volatile than Universal Health Services. It trades about -0.05 of its potential returns per unit of risk. Universal Health Services is currently generating about -0.08 per unit of risk. If you would invest  831.00  in Enhabit on August 17, 2024 and sell it today you would lose (87.00) from holding Enhabit or give up 10.47% of portfolio value over 90 days.

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

Enhabit  vs.  Universal Health Services

Enhabit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enhabit has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 latest fragile performance, the Stock's technical indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Enhabit and Universal Health

The main advantage of trading using opposite Enhabit and Universal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enhabit 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 Enhabit 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.