Correlation Between Charter Communications and HCA Healthcare

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

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

Diversification Opportunities for Charter Communications and HCA Healthcare

0.39

Correlation Coefficient

Charter Communications  HCA Healthcare

Weak diversification

The 3 months correlation between Charter and HCA is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications Cl and HCA Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCA Healthcare and Charter Communications 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 Charter Communications Cl 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 Charter Communications i.e., Charter Communications and HCA Healthcare go up and down completely randomly.

Pair Corralation between Charter Communications and HCA Healthcare

Assuming the 90 days trading horizon Charter Communications is expected to generate 1.55 times less return on investment than HCA Healthcare. But when comparing it to its historical volatility, Charter Communications Cl is 1.05 times less risky than HCA Healthcare. It trades about 0.08 of its potential returns per unit of risk. HCA Healthcare is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  29,855  in HCA Healthcare on December 30, 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Charter Communications Cl  vs.  HCA Healthcare

Charter Communications

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications Cl are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Charter Communications 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 8 (%) 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 Charter Communications and HCA Healthcare

The main advantage of trading using opposite Charter Communications and HCA Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Communications 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 Charter Communications Cl 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.