Correlation Between CVR Energy and HCA Healthcare

Can any of the company-specific risk be diversified away by investing in both CVR Energy 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 CVR Energy and HCA Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CVR Energy and HCA Healthcare, you can compare the effects of market volatilities on CVR Energy 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 CVR Energy with a short position of HCA Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVR Energy and HCA Healthcare.

Diversification Opportunities for CVR Energy and HCA Healthcare

0.46

Correlation Coefficient

CVR Energy  HCA Healthcare

Very weak diversification

The 3 months correlation between CVR and HCA is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding CVR Energy and HCA Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCA Healthcare and CVR Energy 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 CVR Energy 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 CVR Energy i.e., CVR Energy and HCA Healthcare go up and down completely randomly.

Pair Corralation between CVR Energy and HCA Healthcare

Assuming the 90 days trading horizon CVR Energy is expected to generate 1.35 times less return on investment than HCA Healthcare. In addition to that, CVR Energy is 1.45 times more volatile than HCA Healthcare. It trades about 0.06 of its total potential returns per unit of risk. HCA Healthcare is currently generating about 0.11 per unit of volatility. If you would invest  29,855  in HCA Healthcare on December 29, 2024 and sell it today you would earn a total of  4,394  from holding HCA Healthcare or generate 14.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.31%
Values	Daily Returns

CVR Energy  vs.  HCA Healthcare

CVR Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CVR Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CVR Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

HCA Healthcare

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HCA Healthcare are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, HCA Healthcare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVR Energy and HCA Healthcare

The main advantage of trading using opposite CVR Energy and HCA Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVR Energy 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.

The idea behind CVR Energy and HCA Healthcare 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.