Correlation Between Universal Health and Chemed

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

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

Diversification Opportunities for Universal Health and Chemed

0.46

Correlation Coefficient

Universal Health  Chemed

Very weak diversification

The 3 months correlation between Universal and Chemed is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and Chemed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemed 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 Services are associated (or correlated) with Chemed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemed has no effect on the direction of Universal Health i.e., Universal Health and Chemed go up and down completely randomly.

Pair Corralation between Universal Health and Chemed

Assuming the 90 days horizon Universal Health Services is expected to generate 1.12 times more return on investment than Chemed. However, Universal Health is 1.12 times more volatile than Chemed. It trades about -0.05 of its potential returns per unit of risk. Chemed is currently generating about -0.16 per unit of risk. If you would invest  15,284  in Universal Health Services on April 25, 2025 and sell it today you would lose (1,384) from holding Universal Health Services or give up 9.06% of portfolio value over 90 days.

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

Universal Health Services  vs.  Chemed

Universal Health Services

Risk-Adjusted Performance

Very Weak

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

Chemed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chemed has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Universal Health and Chemed

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

The idea behind Universal Health Services and Chemed 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 Transaction History module to view history of all your transactions and understand their impact on performance.