Correlation Between HCA Healthcare and Trainline Plc

Can any of the company-specific risk be diversified away by investing in both HCA Healthcare and Trainline 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 Trainline 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 Trainline Plc, you can compare the effects of market volatilities on HCA Healthcare and Trainline 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 Trainline Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of HCA Healthcare and Trainline Plc.

Diversification Opportunities for HCA Healthcare and Trainline Plc

-0.65

Correlation Coefficient

HCA Healthcare  Trainline Plc

Excellent diversification

The 3 months correlation between HCA and Trainline is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding HCA Healthcare and Trainline Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trainline 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 Trainline Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trainline Plc has no effect on the direction of HCA Healthcare i.e., HCA Healthcare and Trainline Plc go up and down completely randomly.

Pair Corralation between HCA Healthcare and Trainline Plc

Assuming the 90 days trading horizon HCA Healthcare is expected to generate 0.67 times more return on investment than Trainline Plc. However, HCA Healthcare is 1.5 times less risky than Trainline Plc. It trades about 0.08 of its potential returns per unit of risk. Trainline Plc is currently generating about -0.21 per unit of risk. If you would invest  30,044  in HCA Healthcare on December 22, 2024 and sell it today you would earn a total of  2,938  from holding HCA Healthcare or generate 9.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

HCA Healthcare  vs.  Trainline Plc

HCA Healthcare

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HCA Healthcare are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, HCA Healthcare may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Trainline Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trainline Plc 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with HCA Healthcare and Trainline Plc

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

The idea behind HCA Healthcare and Trainline 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.