Correlation Between HEALTHSTREAM (HL5SG) and US Physical

Can any of the company-specific risk be diversified away by investing in both HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM (HL5SG) and US Physical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HEALTHSTREAM and US Physical Therapy, you can compare the effects of market volatilities on HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM (HL5SG) with a short position of US Physical. Check out your portfolio center. Please also check ongoing floating volatility patterns of HEALTHSTREAM (HL5SG) and US Physical.

Diversification Opportunities for HEALTHSTREAM (HL5SG) and US Physical

0.57

Correlation Coefficient

HEALTHSTREAM (HL5SG)  US Physical

Very weak diversification

The 3 months correlation between HEALTHSTREAM and UPH is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding HEALTHSTREAM 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 HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM 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 HEALTHSTREAM (HL5SG) i.e., HEALTHSTREAM (HL5SG) and US Physical go up and down completely randomly.

Pair Corralation between HEALTHSTREAM (HL5SG) and US Physical

Assuming the 90 days trading horizon HEALTHSTREAM is expected to generate 0.78 times more return on investment than US Physical. However, HEALTHSTREAM is 1.29 times less risky than US Physical. It trades about -0.06 of its potential returns per unit of risk. US Physical Therapy is currently generating about -0.22 per unit of risk. If you would invest  3,057  in HEALTHSTREAM on December 24, 2024 and sell it today you would lose (157.00) from holding HEALTHSTREAM or give up 5.14% of portfolio value over 90 days.

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

HEALTHSTREAM  vs.  US Physical Therapy

HEALTHSTREAM (HL5SG)

Risk-Adjusted Performance

Very Weak

Over the last 90 days HEALTHSTREAM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, HEALTHSTREAM (HL5SG) is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

US Physical Therapy

Risk-Adjusted Performance

Very Weak

Over the last 90 days US Physical Therapy 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with HEALTHSTREAM (HL5SG) and US Physical

The main advantage of trading using opposite HEALTHSTREAM (HL5SG) and US Physical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.