Correlation Between Universal Health and CSL

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

Diversification Opportunities for Universal Health and CSL

-0.38

Correlation Coefficient

Universal Health  CSL

Very good diversification

The 3 months correlation between Universal and CSL is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Realty and CSL LTD SPONADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL LTD SPONADR 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 CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL LTD SPONADR has no effect on the direction of Universal Health i.e., Universal Health and CSL go up and down completely randomly.

Pair Corralation between Universal Health and CSL

Assuming the 90 days horizon Universal Health Realty is expected to under-perform the CSL. But the stock apears to be less risky and, when comparing its historical volatility, Universal Health Realty is 1.03 times less risky than CSL. The stock trades about -0.01 of its potential returns per unit of risk. The CSL LTD SPONADR is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,900  in CSL LTD SPONADR on May 21, 2025 and sell it today you would earn a total of  450.00  from holding CSL LTD SPONADR or generate 6.52% 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.  CSL LTD SPONADR

Universal Health Realty

Risk-Adjusted Performance

Weakest

Over the last 90 days Universal Health Realty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Universal Health is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

CSL LTD SPONADR

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in CSL LTD SPONADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking indicators, CSL may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Universal Health and CSL

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

The idea behind Universal Health Realty and CSL LTD SPONADR 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.

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 the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.