Correlation Between US Physicalrapy and National HealthCare

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

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

Diversification Opportunities for US Physicalrapy and National HealthCare

0.73

Correlation Coefficient

US Physicalrapy  National HealthCare

Poor diversification

The 3 months correlation between USPH and National is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding US Physicalrapy and National HealthCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National HealthCare and US Physicalrapy 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 Physicalrapy are associated (or correlated) with National HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National HealthCare has no effect on the direction of US Physicalrapy i.e., US Physicalrapy and National HealthCare go up and down completely randomly.

Pair Corralation between US Physicalrapy and National HealthCare

Given the investment horizon of 90 days US Physicalrapy is expected to under-perform the National HealthCare. But the stock apears to be less risky and, when comparing its historical volatility, US Physicalrapy is 1.12 times less risky than National HealthCare. The stock trades about -0.22 of its potential returns per unit of risk. The National HealthCare is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  10,742  in National HealthCare on December 28, 2024 and sell it today you would lose (1,501) from holding National HealthCare or give up 13.97% of portfolio value over 90 days.

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

US Physicalrapy  vs.  National HealthCare

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.

National HealthCare

Risk-Adjusted Performance

Very Weak

Over the last 90 days National HealthCare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with US Physicalrapy and National HealthCare

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

The idea behind US Physicalrapy and National HealthCare 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.