Correlation Between Dow Jones and HCA Holdings
Can any of the company-specific risk be diversified away by investing in both Dow Jones and HCA Holdings 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 Dow Jones and HCA Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and HCA Holdings, you can compare the effects of market volatilities on Dow Jones and HCA Holdings 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 Dow Jones with a short position of HCA Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and HCA Holdings.
Diversification Opportunities for Dow Jones and HCA Holdings
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and HCA is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and HCA Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCA Holdings and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with HCA Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCA Holdings has no effect on the direction of Dow Jones i.e., Dow Jones and HCA Holdings go up and down completely randomly.
Pair Corralation between Dow Jones and HCA Holdings
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.27 times less return on investment than HCA Holdings. But when comparing it to its historical volatility, Dow Jones Industrial is 2.02 times less risky than HCA Holdings. It trades about 0.08 of its potential returns per unit of risk. HCA Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 23,356 in HCA Holdings on August 30, 2024 and sell it today you would earn a total of 9,191 from holding HCA Holdings or generate 39.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. HCA Holdings
Performance |
| Timeline |
Dow Jones and HCA Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
HCA Holdings
Pair trading matchups for HCA Holdings
Pair Trading with Dow Jones and HCA Holdings
The main advantage of trading using opposite Dow Jones and HCA Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, HCA Holdings 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 HCA Holdings will offset losses from the drop in HCA Holdings' long position.| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
| HCA Holdings vs. Acadia Healthcare | HCA Holdings vs. Tenet Healthcare | HCA Holdings vs. US Physicalrapy | HCA Holdings 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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