Correlation Between US Physical and First Hawaiian

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

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

Diversification Opportunities for US Physical and First Hawaiian

0.35

Correlation Coefficient

US Physical  First Hawaiian

Weak diversification

The 3 months correlation between UPH and First is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding US Physical Therapy and First Hawaiian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Hawaiian and US Physical 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 US Physical Therapy are associated (or correlated) with First Hawaiian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Hawaiian has no effect on the direction of US Physical i.e., US Physical and First Hawaiian go up and down completely randomly.

Pair Corralation between US Physical and First Hawaiian

Assuming the 90 days horizon US Physical Therapy is expected to under-perform the First Hawaiian. In addition to that, US Physical is 1.22 times more volatile than First Hawaiian. It trades about -0.2 of its total potential returns per unit of risk. First Hawaiian is currently generating about -0.08 per unit of volatility. If you would invest  2,397  in First Hawaiian on December 19, 2024 and sell it today you would lose (177.00) from holding First Hawaiian or give up 7.38% of portfolio value over 90 days.

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

US Physical Therapy  vs.  First Hawaiian

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 unsteady 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.

First Hawaiian

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Hawaiian has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with US Physical and First Hawaiian

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

The idea behind US Physical Therapy and First Hawaiian 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.