Correlation Between Outset Medical and US Physicalrapy

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

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

Diversification Opportunities for Outset Medical and US Physicalrapy

0.33

Correlation Coefficient

Outset Medical  US Physicalrapy

Weak diversification

The 3 months correlation between Outset and USPH is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Outset Medical and US Physicalrapy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Physicalrapy and Outset Medical 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 Outset Medical 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 Outset Medical i.e., Outset Medical and US Physicalrapy go up and down completely randomly.

Pair Corralation between Outset Medical and US Physicalrapy

Allowing for the 90-day total investment horizon Outset Medical is expected to generate 5.51 times more return on investment than US Physicalrapy. However, Outset Medical is 5.51 times more volatile than US Physicalrapy. It trades about -0.01 of its potential returns per unit of risk. US Physicalrapy is currently generating about -0.15 per unit of risk. If you would invest  90.00  in Outset Medical on November 29, 2024 and sell it today you would lose (14.00) from holding Outset Medical or give up 15.56% of portfolio value over 90 days.

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

Outset Medical  vs.  US Physicalrapy

Outset Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Outset Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Outset Medical is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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 latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Outset Medical and US Physicalrapy

The main advantage of trading using opposite Outset Medical and US Physicalrapy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Outset Medical 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 Outset Medical 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.