Correlation Between OPKO HEALTH and US Physical

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

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

Diversification Opportunities for OPKO HEALTH and US Physical

0.85

Correlation Coefficient

OPKO HEALTH  US Physical

Very poor diversification

The 3 months correlation between OPKO and UPH is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding OPKO HEALTH and US Physical Therapy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Physical Therapy and OPKO HEALTH 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 OPKO HEALTH are associated (or correlated) with US Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Physical Therapy has no effect on the direction of OPKO HEALTH i.e., OPKO HEALTH and US Physical go up and down completely randomly.

Pair Corralation between OPKO HEALTH and US Physical

Assuming the 90 days trading horizon OPKO HEALTH is expected to generate 6.19 times less return on investment than US Physical. But when comparing it to its historical volatility, OPKO HEALTH is 2.78 times less risky than US Physical. It trades about 0.06 of its potential returns per unit of risk. US Physical Therapy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7,511  in US Physical Therapy on October 6, 2024 and sell it today you would earn a total of  1,039  from holding US Physical Therapy or generate 13.83% return on investment over 90 days.

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

OPKO HEALTH  vs.  US Physical Therapy

OPKO HEALTH

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OPKO HEALTH are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, OPKO HEALTH is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

US Physical Therapy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in US Physical Therapy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, US Physical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OPKO HEALTH and US Physical

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

The idea behind OPKO HEALTH and US Physical Therapy 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.