Correlation Between Tenet Healthcare and US Physicalrapy

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

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

Diversification Opportunities for Tenet Healthcare and US Physicalrapy

0.43

Correlation Coefficient

Tenet Healthcare  US Physicalrapy

Very weak diversification

The 3 months correlation between Tenet and USPH is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Tenet Healthcare and US Physicalrapy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Physicalrapy and Tenet 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 Tenet Healthcare 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 Tenet Healthcare i.e., Tenet Healthcare and US Physicalrapy go up and down completely randomly.

Pair Corralation between Tenet Healthcare and US Physicalrapy

Considering the 90-day investment horizon Tenet Healthcare is expected to generate 1.65 times more return on investment than US Physicalrapy. However, Tenet Healthcare is 1.65 times more volatile than US Physicalrapy. It trades about 0.06 of its potential returns per unit of risk. US Physicalrapy is currently generating about -0.21 per unit of risk. If you would invest  12,542  in Tenet Healthcare on December 28, 2024 and sell it today you would earn a total of  902.00  from holding Tenet Healthcare or generate 7.19% return on investment over 90 days.

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

Tenet Healthcare  vs.  US Physicalrapy

Tenet Healthcare

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tenet Healthcare are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Tenet Healthcare may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 Tenet Healthcare and US Physicalrapy

The main advantage of trading using opposite Tenet Healthcare and US Physicalrapy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tenet Healthcare 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 Tenet Healthcare 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.