Correlation Between Definitive Healthcare and HCA Holdings

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

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

Diversification Opportunities for Definitive Healthcare and HCA Holdings

-0.02

Correlation Coefficient

Definitive Healthcare  HCA Holdings

Good diversification

The 3 months correlation between Definitive and HCA is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Definitive Healthcare Corp and HCA Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCA Holdings and Definitive 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 Definitive Healthcare Corp are associated (or correlated) with HCA Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCA Holdings has no effect on the direction of Definitive Healthcare i.e., Definitive Healthcare and HCA Holdings go up and down completely randomly.

Pair Corralation between Definitive Healthcare and HCA Holdings

Allowing for the 90-day total investment horizon Definitive Healthcare Corp is expected to generate 2.13 times more return on investment than HCA Holdings. However, Definitive Healthcare is 2.13 times more volatile than HCA Holdings. It trades about 0.07 of its potential returns per unit of risk. HCA Holdings is currently generating about -0.41 per unit of risk. If you would invest  412.00  in Definitive Healthcare Corp on October 6, 2024 and sell it today you would earn a total of  24.00  from holding Definitive Healthcare Corp or generate 5.83% return on investment over 90 days.

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

Definitive Healthcare Corp  vs.  HCA Holdings

Definitive Healthcare

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Definitive Healthcare Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Definitive Healthcare is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

HCA Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HCA Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Etf's fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with Definitive Healthcare and HCA Holdings

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

The idea behind Definitive Healthcare Corp and HCA Holdings 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.