Correlation Between HCA Healthcare and US Physical

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

By analyzing existing cross correlation between HCA Healthcare and US Physical Therapy, you can compare the effects of market volatilities on HCA Healthcare and US Physical 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 HCA Healthcare with a short position of US Physical. Check out your portfolio center. Please also check ongoing floating volatility patterns of HCA Healthcare and US Physical.

Diversification Opportunities for HCA Healthcare and US Physical

-0.81

Correlation Coefficient

HCA Healthcare  US Physical

Pay attention - limited upside

The 3 months correlation between HCA and UPH is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding HCA Healthcare and US Physical Therapy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Physical Therapy and HCA Healthcare 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 HCA Healthcare are associated (or correlated) with US Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Physical Therapy has no effect on the direction of HCA Healthcare i.e., HCA Healthcare and US Physical go up and down completely randomly.

Pair Corralation between HCA Healthcare and US Physical

Assuming the 90 days horizon HCA Healthcare is expected to under-perform the US Physical. But the stock apears to be less risky and, when comparing its historical volatility, HCA Healthcare is 2.5 times less risky than US Physical. The stock trades about -0.31 of its potential returns per unit of risk. The US Physical Therapy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7,511  in US Physical Therapy on October 6, 2024 and sell it today you would earn a total of  1,039  from holding US Physical Therapy or generate 13.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	97.5%
Values	Daily Returns

HCA Healthcare  vs.  US Physical Therapy

HCA Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HCA Healthcare 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

US Physical Therapy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in US Physical Therapy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, US Physical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HCA Healthcare and US Physical

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

The idea behind HCA Healthcare and US Physical Therapy 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.