Correlation Between US Physical and Reinsurance Group

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

Diversification Opportunities for US Physical and Reinsurance Group

0.69

Correlation Coefficient

US Physical  Reinsurance Group

Poor diversification

The 3 months correlation between UPH and Reinsurance is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding US Physical Therapy and Reinsurance Group of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reinsurance Group 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 Reinsurance Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reinsurance Group has no effect on the direction of US Physical i.e., US Physical and Reinsurance Group go up and down completely randomly.

Pair Corralation between US Physical and Reinsurance Group

Assuming the 90 days horizon US Physical Therapy is expected to generate 1.14 times more return on investment than Reinsurance Group. However, US Physical is 1.14 times more volatile than Reinsurance Group of. It trades about 0.15 of its potential returns per unit of risk. Reinsurance Group of is currently generating about 0.07 per unit of risk. If you would invest  6,914  in US Physical Therapy on October 9, 2024 and sell it today you would earn a total of  1,636  from holding US Physical Therapy or generate 23.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

US Physical Therapy  vs.  Reinsurance Group of

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.

Reinsurance Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Reinsurance Group of are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Reinsurance Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with US Physical and Reinsurance Group

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

The idea behind US Physical Therapy and Reinsurance Group of 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.