Correlation Between HCA Holdings and US Physicalrapy

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

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

Diversification Opportunities for HCA Holdings and US Physicalrapy

-0.45

Correlation Coefficient

HCA Holdings  US Physicalrapy

Very good diversification

The 3 months correlation between HCA and USPH is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding HCA Holdings and US Physicalrapy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Physicalrapy and HCA Holdings 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 Holdings are associated (or correlated) with US Physicalrapy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Physicalrapy has no effect on the direction of HCA Holdings i.e., HCA Holdings and US Physicalrapy go up and down completely randomly.

Pair Corralation between HCA Holdings and US Physicalrapy

Considering the 90-day investment horizon HCA Holdings is expected to generate 1.38 times more return on investment than US Physicalrapy. However, HCA Holdings is 1.38 times more volatile than US Physicalrapy. It trades about 0.1 of its potential returns per unit of risk. US Physicalrapy is currently generating about -0.24 per unit of risk. If you would invest  30,208  in HCA Holdings on December 26, 2024 and sell it today you would earn a total of  3,521  from holding HCA Holdings or generate 11.66% return on investment over 90 days.

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

HCA Holdings  vs.  US Physicalrapy

HCA Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HCA Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, HCA Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

US Physicalrapy

Risk-Adjusted Performance

Very Weak

Over the last 90 days US Physicalrapy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with HCA Holdings and US Physicalrapy

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

The idea behind HCA Holdings and US Physicalrapy 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.