Correlation Between US Physical and Preferred Bank
Can any of the company-specific risk be diversified away by investing in both US Physical and Preferred Bank 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 Preferred Bank 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 Preferred Bank, you can compare the effects of market volatilities on US Physical and Preferred Bank 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 Preferred Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Physical and Preferred Bank.
Diversification Opportunities for US Physical and Preferred Bank
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between UPH and Preferred is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding US Physical Therapy and Preferred Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Bank 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 Preferred Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Bank has no effect on the direction of US Physical i.e., US Physical and Preferred Bank go up and down completely randomly.
Pair Corralation between US Physical and Preferred Bank
Assuming the 90 days horizon US Physical is expected to generate 8.13 times less return on investment than Preferred Bank. In addition to that, US Physical is 1.02 times more volatile than Preferred Bank. It trades about 0.02 of its total potential returns per unit of risk. Preferred Bank is currently generating about 0.2 per unit of volatility. If you would invest 8,125 in Preferred Bank on November 6, 2024 and sell it today you would earn a total of 575.00 from holding Preferred Bank or generate 7.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Physical Therapy vs. Preferred Bank
Performance |
| Timeline |
| US Physical Therapy |
| Preferred Bank |
US Physical and Preferred Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Physical and Preferred Bank
The main advantage of trading using opposite US Physical and Preferred Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Physical position performs unexpectedly, Preferred Bank 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 Preferred Bank will offset losses from the drop in Preferred Bank's long position.| US Physical vs. Take Two Interactive Software | US Physical vs. Check Point Software | US Physical vs. VITEC SOFTWARE GROUP | US Physical vs. Sekisui Chemical Co |
| Preferred Bank vs. Electronic Arts | Preferred Bank vs. AOI Electronics Co | Preferred Bank vs. Northern Data AG | Preferred Bank vs. UMC Electronics Co |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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