Correlation Between Worldwide Healthcare and HCA Healthcare
Can any of the company-specific risk be diversified away by investing in both Worldwide Healthcare and HCA Healthcare 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 Worldwide Healthcare and HCA Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Worldwide Healthcare Trust and HCA Healthcare, you can compare the effects of market volatilities on Worldwide Healthcare and HCA Healthcare 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 Worldwide Healthcare with a short position of HCA Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Worldwide Healthcare and HCA Healthcare.
Diversification Opportunities for Worldwide Healthcare and HCA Healthcare
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Worldwide and HCA is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Worldwide Healthcare Trust and HCA Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCA Healthcare and Worldwide Healthcare 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 Worldwide Healthcare Trust are associated (or correlated) with HCA Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCA Healthcare has no effect on the direction of Worldwide Healthcare i.e., Worldwide Healthcare and HCA Healthcare go up and down completely randomly.
Pair Corralation between Worldwide Healthcare and HCA Healthcare
Assuming the 90 days trading horizon Worldwide Healthcare Trust is expected to generate 0.78 times more return on investment than HCA Healthcare. However, Worldwide Healthcare Trust is 1.28 times less risky than HCA Healthcare. It trades about -0.16 of its potential returns per unit of risk. HCA Healthcare is currently generating about -0.27 per unit of risk. If you would invest 34,000 in Worldwide Healthcare Trust on August 30, 2024 and sell it today you would lose (1,350) from holding Worldwide Healthcare Trust or give up 3.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Worldwide Healthcare Trust vs. HCA Healthcare
Performance |
| Timeline |
| Worldwide Healthcare |
| HCA Healthcare |
Worldwide Healthcare and HCA Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Worldwide Healthcare and HCA Healthcare
The main advantage of trading using opposite Worldwide Healthcare and HCA Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Worldwide Healthcare position performs unexpectedly, HCA Healthcare 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 Healthcare will offset losses from the drop in HCA Healthcare's long position.| Worldwide Healthcare vs. Samsung Electronics Co | Worldwide Healthcare vs. Samsung Electronics Co | Worldwide Healthcare vs. Hyundai Motor | Worldwide Healthcare vs. Toyota Motor Corp |
| HCA Healthcare vs. Ecofin Global Utilities | HCA Healthcare vs. Qurate Retail Series | HCA Healthcare vs. Norwegian Air Shuttle | HCA Healthcare vs. Delta Air Lines |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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