Correlation Between HCA Healthcare and IDEXX Laboratories

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

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

Diversification Opportunities for HCA Healthcare and IDEXX Laboratories

0.58

Correlation Coefficient

HCA Healthcare  IDEXX Laboratories

Very weak diversification

The 3 months correlation between HCA and IDEXX is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding HCA Healthcare and IDEXX Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEXX Laboratories 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 IDEXX Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEXX Laboratories has no effect on the direction of HCA Healthcare i.e., HCA Healthcare and IDEXX Laboratories go up and down completely randomly.

Pair Corralation between HCA Healthcare and IDEXX Laboratories

Assuming the 90 days trading horizon HCA Healthcare is expected to generate 0.78 times more return on investment than IDEXX Laboratories. However, HCA Healthcare is 1.28 times less risky than IDEXX Laboratories. It trades about 0.21 of its potential returns per unit of risk. IDEXX Laboratories is currently generating about 0.16 per unit of risk. If you would invest  30,435  in HCA Healthcare on October 25, 2024 and sell it today you would earn a total of  1,517  from holding HCA Healthcare or generate 4.98% return on investment over 90 days.

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

HCA Healthcare  vs.  IDEXX Laboratories

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 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.

IDEXX Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with HCA Healthcare and IDEXX Laboratories

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

The idea behind HCA Healthcare and IDEXX Laboratories 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.