Correlation Between Aeorema Communications and HCA Healthcare

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

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

Diversification Opportunities for Aeorema Communications and HCA Healthcare

-0.62

Correlation Coefficient

Aeorema Communications  HCA Healthcare

Excellent diversification

The 3 months correlation between Aeorema and HCA is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema Communications Plc and HCA Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCA Healthcare and Aeorema Communications 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 Aeorema Communications Plc 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 Aeorema Communications i.e., Aeorema Communications and HCA Healthcare go up and down completely randomly.

Pair Corralation between Aeorema Communications and HCA Healthcare

Assuming the 90 days trading horizon Aeorema Communications Plc is expected to under-perform the HCA Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Aeorema Communications Plc is 1.35 times less risky than HCA Healthcare. The stock trades about -0.2 of its potential returns per unit of risk. The HCA Healthcare is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  29,855  in HCA Healthcare on December 30, 2024 and sell it today you would earn a total of  4,394  from holding HCA Healthcare or generate 14.72% return on investment over 90 days.

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

Aeorema Communications Plc  vs.  HCA Healthcare

Aeorema Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aeorema Communications 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.

HCA Healthcare

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HCA Healthcare are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, HCA Healthcare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aeorema Communications and HCA Healthcare

The main advantage of trading using opposite Aeorema Communications and HCA Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeorema Communications 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 Aeorema Communications Plc 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.