Correlation Between Select Medical and US Physicalrapy
Can any of the company-specific risk be diversified away by investing in both Select Medical and US Physicalrapy 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 Select Medical and US Physicalrapy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Select Medical Holdings and US Physicalrapy, you can compare the effects of market volatilities on Select Medical and US Physicalrapy 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 Select Medical with a short position of US Physicalrapy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Medical and US Physicalrapy.
Diversification Opportunities for Select Medical and US Physicalrapy
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Select and USPH is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Select Medical Holdings and US Physicalrapy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Physicalrapy and Select Medical 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 Select Medical Holdings are associated (or correlated) with US Physicalrapy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Physicalrapy has no effect on the direction of Select Medical i.e., Select Medical and US Physicalrapy go up and down completely randomly.
Pair Corralation between Select Medical and US Physicalrapy
Considering the 90-day investment horizon Select Medical Holdings is expected to generate 1.04 times more return on investment than US Physicalrapy. However, Select Medical is 1.04 times more volatile than US Physicalrapy. It trades about 0.1 of its potential returns per unit of risk. US Physicalrapy is currently generating about 0.03 per unit of risk. If you would invest 2,560 in Select Medical Holdings on August 28, 2024 and sell it today you would earn a total of 1,310 from holding Select Medical Holdings or generate 51.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Select Medical Holdings vs. US Physicalrapy
Performance |
| Timeline |
| Select Medical Holdings |
| US Physicalrapy |
Select Medical and US Physicalrapy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Medical and US Physicalrapy
The main advantage of trading using opposite Select Medical and US Physicalrapy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Medical position performs unexpectedly, US Physicalrapy 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 Physicalrapy will offset losses from the drop in US Physicalrapy's long position.| Select Medical vs. The Ensign Group | Select Medical vs. Encompass Health Corp | Select Medical vs. InnovAge Holding Corp | Select Medical vs. Enhabit |
| US Physicalrapy vs. Acadia Healthcare | US Physicalrapy vs. Tenet Healthcare | US Physicalrapy vs. HCA Holdings | US Physicalrapy vs. DaVita HealthCare Partners |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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