Correlation Between Volkswagen and HCA Healthcare

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

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

Diversification Opportunities for Volkswagen and HCA Healthcare

0.65

Correlation Coefficient

Volkswagen  HCA Healthcare

Poor diversification

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

Pair Corralation between Volkswagen and HCA Healthcare

Assuming the 90 days trading horizon Volkswagen AG is expected to generate 1.17 times more return on investment than HCA Healthcare. However, Volkswagen is 1.17 times more volatile than HCA Healthcare. It trades about 0.13 of its potential returns per unit of risk. HCA Healthcare is currently generating about -0.07 per unit of risk. If you would invest  8,785  in Volkswagen AG on October 11, 2024 and sell it today you would earn a total of  320.00  from holding Volkswagen AG or generate 3.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Volkswagen AG  vs.  HCA Healthcare

Volkswagen AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG 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.

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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Volkswagen and HCA Healthcare

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

The idea behind Volkswagen AG and HCA Healthcare 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.