Correlation Between HCA Healthcare and GlobalData PLC

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

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

Diversification Opportunities for HCA Healthcare and GlobalData PLC

-0.11

Correlation Coefficient

HCA Healthcare  GlobalData PLC

Good diversification

The 3 months correlation between HCA and GlobalData is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding HCA Healthcare and GlobalData PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GlobalData PLC 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 GlobalData PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GlobalData PLC has no effect on the direction of HCA Healthcare i.e., HCA Healthcare and GlobalData PLC go up and down completely randomly.

Pair Corralation between HCA Healthcare and GlobalData PLC

Assuming the 90 days trading horizon HCA Healthcare is expected to under-perform the GlobalData PLC. But the stock apears to be less risky and, when comparing its historical volatility, HCA Healthcare is 1.0 times less risky than GlobalData PLC. The stock trades about -0.13 of its potential returns per unit of risk. The GlobalData PLC is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  22,050  in GlobalData PLC on September 4, 2024 and sell it today you would lose (1,850) from holding GlobalData PLC or give up 8.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

HCA Healthcare  vs.  GlobalData PLC

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.

GlobalData PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GlobalData PLC 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.

Pair Trading with HCA Healthcare and GlobalData PLC

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

The idea behind HCA Healthcare and GlobalData PLC 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.