Correlation Between HCA Healthcare, and British American

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

By analyzing existing cross correlation between HCA Healthcare, and British American Tobacco, you can compare the effects of market volatilities on HCA Healthcare, and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of HCA Healthcare, and British American.

Diversification Opportunities for HCA Healthcare, and British American

-0.56

Correlation Coefficient

HCA Healthcare,  British American

Excellent diversification

The 3 months correlation between HCA and British is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding HCA Healthcare, and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of HCA Healthcare, i.e., HCA Healthcare, and British American go up and down completely randomly.

Pair Corralation between HCA Healthcare, and British American

Assuming the 90 days trading horizon HCA Healthcare, is expected to under-perform the British American. In addition to that, HCA Healthcare, is 1.78 times more volatile than British American Tobacco. It trades about -0.12 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.24 per unit of volatility. If you would invest  3,811  in British American Tobacco on October 7, 2024 and sell it today you would earn a total of  713.00  from holding British American Tobacco or generate 18.71% return on investment over 90 days.

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

HCA Healthcare,  vs.  British American Tobacco

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. Despite weak performance in the last few months, the Stock'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 company investors.

British American Tobacco

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, British American sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HCA Healthcare, and British American

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

The idea behind HCA Healthcare, and British American Tobacco 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.