Correlation Between HCA Healthcare and Charter Communications

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

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

Diversification Opportunities for HCA Healthcare and Charter Communications

-0.83

Correlation Coefficient

HCA Healthcare  Charter Communications

Pay attention - limited upside

The 3 months correlation between HCA and Charter is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding HCA Healthcare and Charter Communications Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and HCA 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 HCA Healthcare are associated (or correlated) with Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of HCA Healthcare i.e., HCA Healthcare and Charter Communications go up and down completely randomly.

Pair Corralation between HCA Healthcare and Charter Communications

Assuming the 90 days trading horizon HCA Healthcare is expected to under-perform the Charter Communications. But the stock apears to be less risky and, when comparing its historical volatility, HCA Healthcare is 1.31 times less risky than Charter Communications. The stock trades about -0.14 of its potential returns per unit of risk. The Charter Communications Cl is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  34,558  in Charter Communications Cl on September 3, 2024 and sell it today you would earn a total of  5,052  from holding Charter Communications Cl or generate 14.62% return on investment over 90 days.

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

HCA Healthcare  vs.  Charter Communications Cl

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 unsteady 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.

Charter Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications Cl are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Charter Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HCA Healthcare and Charter Communications

The main advantage of trading using opposite HCA Healthcare and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HCA Healthcare position performs unexpectedly, Charter Communications 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 Charter Communications will offset losses from the drop in Charter Communications' long position.

The idea behind HCA Healthcare and Charter Communications Cl 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.