Correlation Between Global Net and HCA Healthcare

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

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

Diversification Opportunities for Global Net and HCA Healthcare

0.86

Correlation Coefficient

Global Net  HCA Healthcare

Very poor diversification

The 3 months correlation between Global and HCA is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Global Net Lease and HCA Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCA Healthcare and Global Net 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 Global Net Lease 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 Global Net i.e., Global Net and HCA Healthcare go up and down completely randomly.

Pair Corralation between Global Net and HCA Healthcare

Assuming the 90 days trading horizon Global Net Lease is expected to generate 0.81 times more return on investment than HCA Healthcare. However, Global Net Lease is 1.23 times less risky than HCA Healthcare. It trades about -0.11 of its potential returns per unit of risk. HCA Healthcare is currently generating about -0.14 per unit of risk. If you would invest  849.00  in Global Net Lease on September 2, 2024 and sell it today you would lose (91.00) from holding Global Net Lease or give up 10.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Global Net Lease  vs.  HCA Healthcare

Global Net Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Net Lease has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

HCA Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HCA Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Global Net and HCA Healthcare

The main advantage of trading using opposite Global Net and HCA Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Net 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 Global Net Lease 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.