Correlation Between Microsoft and HCA Holdings
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and HCA Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and HCA Holdings, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of HCA Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and HCA Holdings.
Diversification Opportunities for Microsoft and HCA Holdings
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and HCA is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and HCA Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCA Holdings and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and HCA Holdings go up and down completely randomly.
Pair Corralation between Microsoft and HCA Holdings
Given the investment horizon of 90 days Microsoft is expected to generate 0.99 times more return on investment than HCA Holdings. However, Microsoft is 1.01 times less risky than HCA Holdings. It trades about 0.09 of its potential returns per unit of risk. HCA Holdings is currently generating about 0.05 per unit of risk. If you would invest 24,146 in Microsoft on August 30, 2024 and sell it today you would earn a total of 18,153 from holding Microsoft or generate 75.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. HCA Holdings
Performance |
| Timeline |
| Microsoft |
| HCA Holdings |
Microsoft and HCA Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and HCA Holdings
The main advantage of trading using opposite Microsoft and HCA Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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