Correlation Between Universal Health and Smith Nephew

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

Diversification Opportunities for Universal Health and Smith Nephew

-0.75

Correlation Coefficient

Universal Health  Smith Nephew

Pay attention - limited upside

The 3 months correlation between Universal and Smith is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and Smith Nephew SNATS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Nephew SNATS 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 Smith Nephew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Nephew SNATS has no effect on the direction of Universal Health i.e., Universal Health and Smith Nephew go up and down completely randomly.

Pair Corralation between Universal Health and Smith Nephew

Considering the 90-day investment horizon Universal Health Services is expected to generate 0.71 times more return on investment than Smith Nephew. However, Universal Health Services is 1.42 times less risky than Smith Nephew. It trades about 0.14 of its potential returns per unit of risk. Smith Nephew SNATS is currently generating about -0.09 per unit of risk. If you would invest  20,407  in Universal Health Services on September 16, 2025 and sell it today you would earn a total of  1,853  from holding Universal Health Services or generate 9.08% return on investment over 90 days.

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

Universal Health Services  vs.  Smith Nephew SNATS

Universal Health Services

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Health Services are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, Universal Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Smith Nephew SNATS

Risk-Adjusted Performance

Weakest

Over the last 90 days Smith Nephew SNATS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Universal Health and Smith Nephew

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

The idea behind Universal Health Services and Smith Nephew SNATS 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.