Correlation Between US Physical and HEALTHSTREAM (HL5SG)

Can any of the company-specific risk be diversified away by investing in both US Physical and HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM, you can compare the effects of market volatilities on US Physical and HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM (HL5SG). Check out your portfolio center. Please also check ongoing floating volatility patterns of US Physical and HEALTHSTREAM (HL5SG).

Diversification Opportunities for US Physical and HEALTHSTREAM (HL5SG)

0.57

Correlation Coefficient

US Physical  HEALTHSTREAM (HL5SG)

Very weak diversification

The 3 months correlation between UPH and HEALTHSTREAM is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding US Physical Therapy and HEALTHSTREAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM (HL5SG). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEALTHSTREAM (HL5SG) has no effect on the direction of US Physical i.e., US Physical and HEALTHSTREAM (HL5SG) go up and down completely randomly.

Pair Corralation between US Physical and HEALTHSTREAM (HL5SG)

Assuming the 90 days horizon US Physical Therapy is expected to under-perform the HEALTHSTREAM (HL5SG). In addition to that, US Physical is 1.29 times more volatile than HEALTHSTREAM. It trades about -0.22 of its total potential returns per unit of risk. HEALTHSTREAM is currently generating about -0.06 per unit of volatility. 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

US Physical Therapy  vs.  HEALTHSTREAM

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.

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.

Pair Trading with US Physical and HEALTHSTREAM (HL5SG)

The main advantage of trading using opposite US Physical and HEALTHSTREAM (HL5SG) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Physical position performs unexpectedly, HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM (HL5SG) will offset losses from the drop in HEALTHSTREAM (HL5SG)'s long position.

The idea behind US Physical Therapy and HEALTHSTREAM 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.