Correlation Between Universal Health and Fresenius Medical

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

Diversification Opportunities for Universal Health and Fresenius Medical

0.61

Correlation Coefficient

Universal Health  Fresenius Medical

Poor diversification

The 3 months correlation between Universal and Fresenius is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and Fresenius Medical Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius Medical Care 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 Fresenius Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius Medical Care has no effect on the direction of Universal Health i.e., Universal Health and Fresenius Medical go up and down completely randomly.

Pair Corralation between Universal Health and Fresenius Medical

Assuming the 90 days horizon Universal Health is expected to generate 4.39 times less return on investment than Fresenius Medical. In addition to that, Universal Health is 1.36 times more volatile than Fresenius Medical Care. It trades about 0.02 of its total potential returns per unit of risk. Fresenius Medical Care is currently generating about 0.13 per unit of volatility. If you would invest  4,004  in Fresenius Medical Care on April 23, 2025 and sell it today you would earn a total of  561.00  from holding Fresenius Medical Care or generate 14.01% return on investment over 90 days.

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

Universal Health Services  vs.  Fresenius Medical Care

Universal Health Services

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Health Services are ranked lower than 1 (%) 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Fresenius Medical Care

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius Medical Care are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fresenius Medical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Health and Fresenius Medical

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

The idea behind Universal Health Services and Fresenius Medical Care 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..