Correlation Between Brookdale Senior and US Physicalrapy

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

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

Diversification Opportunities for Brookdale Senior and US Physicalrapy

-0.49

Correlation Coefficient

Brookdale Senior  US Physicalrapy

Very good diversification

The 3 months correlation between Brookdale and USPH is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Brookdale Senior Living and US Physicalrapy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Physicalrapy and Brookdale Senior 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 Brookdale Senior Living 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 Brookdale Senior i.e., Brookdale Senior and US Physicalrapy go up and down completely randomly.

Pair Corralation between Brookdale Senior and US Physicalrapy

Considering the 90-day investment horizon Brookdale Senior Living is expected to generate 1.58 times more return on investment than US Physicalrapy. However, Brookdale Senior is 1.58 times more volatile than US Physicalrapy. It trades about 0.04 of its potential returns per unit of risk. US Physicalrapy is currently generating about 0.0 per unit of risk. If you would invest  404.00  in Brookdale Senior Living on August 31, 2024 and sell it today you would earn a total of  164.00  from holding Brookdale Senior Living or generate 40.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Brookdale Senior Living  vs.  US Physicalrapy

Brookdale Senior Living

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookdale Senior Living has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward-looking signals remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

US Physicalrapy

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in US Physicalrapy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, US Physicalrapy demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookdale Senior and US Physicalrapy

The main advantage of trading using opposite Brookdale Senior and US Physicalrapy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookdale Senior 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.

The idea behind Brookdale Senior Living and US Physicalrapy 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.