Correlation Between BW Offshore and HCA Healthcare

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

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

Diversification Opportunities for BW Offshore and HCA Healthcare

0.59

Correlation Coefficient

BW Offshore  HCA Healthcare

Very weak diversification

The 3 months correlation between 0RKH and HCA is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore and HCA Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCA Healthcare and BW Offshore 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 BW Offshore 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 BW Offshore i.e., BW Offshore and HCA Healthcare go up and down completely randomly.

Pair Corralation between BW Offshore and HCA Healthcare

Assuming the 90 days trading horizon BW Offshore is expected to generate 1.35 times more return on investment than HCA Healthcare. However, BW Offshore is 1.35 times more volatile than HCA Healthcare. It trades about 0.07 of its potential returns per unit of risk. HCA Healthcare is currently generating about 0.04 per unit of risk. If you would invest  2,022  in BW Offshore on September 27, 2024 and sell it today you would earn a total of  771.00  from holding BW Offshore or generate 38.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.61%
Values	Daily Returns

BW Offshore  vs.  HCA Healthcare

BW Offshore

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BW Offshore is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with BW Offshore and HCA Healthcare

The main advantage of trading using opposite BW Offshore and HCA Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW Offshore 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 BW Offshore 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.