Correlation Between HCA Healthcare, and Credit Acceptance

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

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

Diversification Opportunities for HCA Healthcare, and Credit Acceptance

0.0

Correlation Coefficient

HCA Healthcare,  Credit Acceptance

Pay attention - limited upside

The 3 months correlation between HCA and Credit is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding HCA Healthcare, and Credit Acceptance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Acceptance 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 Credit Acceptance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Acceptance has no effect on the direction of HCA Healthcare, i.e., HCA Healthcare, and Credit Acceptance go up and down completely randomly.

Pair Corralation between HCA Healthcare, and Credit Acceptance

Assuming the 90 days trading horizon HCA Healthcare, is expected to generate 1.26 times less return on investment than Credit Acceptance. In addition to that, HCA Healthcare, is 1.05 times more volatile than Credit Acceptance. It trades about 0.05 of its total potential returns per unit of risk. Credit Acceptance is currently generating about 0.07 per unit of volatility. If you would invest  20,300  in Credit Acceptance on October 11, 2024 and sell it today you would earn a total of  12,200  from holding Credit Acceptance or generate 60.1% return on investment over 90 days.

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

HCA Healthcare,  vs.  Credit Acceptance

HCA Healthcare,

Risk-Adjusted Performance

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Very Weak

Over the last 90 days HCA Healthcare, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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.

Credit Acceptance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Credit Acceptance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Credit Acceptance is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HCA Healthcare, and Credit Acceptance

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

The idea behind HCA Healthcare, and Credit Acceptance 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.