Correlation Between US Physical and Hyundai

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

Diversification Opportunities for US Physical and Hyundai

-0.81

Correlation Coefficient

US Physical  Hyundai

Pay attention - limited upside

The 3 months correlation between UPH and Hyundai is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding US Physical Therapy and Hyundai Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor 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 Hyundai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Motor has no effect on the direction of US Physical i.e., US Physical and Hyundai go up and down completely randomly.

Pair Corralation between US Physical and Hyundai

Assuming the 90 days horizon US Physical Therapy is expected to under-perform the Hyundai. But the stock apears to be less risky and, when comparing its historical volatility, US Physical Therapy is 2.34 times less risky than Hyundai. The stock trades about -0.14 of its potential returns per unit of risk. The Hyundai Motor is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,860  in Hyundai Motor on October 9, 2024 and sell it today you would earn a total of  80.00  from holding Hyundai Motor or generate 1.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	52.94%
Values	Daily Returns

US Physical Therapy  vs.  Hyundai Motor

US Physical Therapy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Physical Therapy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, US Physical reported solid returns over the last few months and may actually be approaching a breakup point.

Hyundai Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyundai Motor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Hyundai 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 Hyundai

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

The idea behind US Physical Therapy and Hyundai Motor 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.