Correlation Between US Physicalrapy and Select Medical

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

By analyzing existing cross correlation between US Physicalrapy and Select Medical Holdings, you can compare the effects of market volatilities on US Physicalrapy and Select Medical 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 Select Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Physicalrapy and Select Medical.

Diversification Opportunities for US Physicalrapy and Select Medical

0.71

Correlation Coefficient

US Physicalrapy  Select Medical

Poor diversification

The 3 months correlation between USPH and Select is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding US Physicalrapy and Select Medical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Medical Holdings 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 Select Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Medical Holdings has no effect on the direction of US Physicalrapy i.e., US Physicalrapy and Select Medical go up and down completely randomly.

Pair Corralation between US Physicalrapy and Select Medical

Given the investment horizon of 90 days US Physicalrapy is expected to under-perform the Select Medical. But the stock apears to be less risky and, when comparing its historical volatility, US Physicalrapy is 1.42 times less risky than Select Medical. The stock trades about -0.21 of its potential returns per unit of risk. The Select Medical Holdings is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,873  in Select Medical Holdings on December 28, 2024 and sell it today you would lose (170.00) from holding Select Medical Holdings or give up 9.08% 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.  Select Medical Holdings

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.

Select Medical Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Select Medical Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with US Physicalrapy and Select Medical

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

The idea behind US Physicalrapy and Select Medical Holdings 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.