Correlation Between HCA Healthcare and Extra Space

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

By analyzing existing cross correlation between HCA Healthcare and Extra Space Storage, you can compare the effects of market volatilities on HCA Healthcare and Extra Space 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 Extra Space. Check out your portfolio center. Please also check ongoing floating volatility patterns of HCA Healthcare and Extra Space.

Diversification Opportunities for HCA Healthcare and Extra Space

0.18

Correlation Coefficient

HCA Healthcare  Extra Space

Average diversification

The 3 months correlation between HCA and Extra is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding HCA Healthcare and Extra Space Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extra Space Storage 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 Extra Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extra Space Storage has no effect on the direction of HCA Healthcare i.e., HCA Healthcare and Extra Space go up and down completely randomly.

Pair Corralation between HCA Healthcare and Extra Space

Assuming the 90 days trading horizon HCA Healthcare is expected to generate 1.56 times more return on investment than Extra Space. However, HCA Healthcare is 1.56 times more volatile than Extra Space Storage. It trades about 0.11 of its potential returns per unit of risk. Extra Space Storage is currently generating about 0.01 per unit of risk. 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

HCA Healthcare  vs.  Extra Space Storage

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.

Extra Space Storage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Extra Space Storage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Extra Space is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with HCA Healthcare and Extra Space

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

The idea behind HCA Healthcare and Extra Space Storage 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.