Correlation Between HCA Healthcare, and Healthcare Realty

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

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

Diversification Opportunities for HCA Healthcare, and Healthcare Realty

-0.72

Correlation Coefficient

HCA Healthcare,  Healthcare Realty

Pay attention - limited upside

The 3 months correlation between HCA and Healthcare is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding HCA Healthcare, and Healthcare Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare Realty Trust 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 Healthcare Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare Realty Trust has no effect on the direction of HCA Healthcare, i.e., HCA Healthcare, and Healthcare Realty go up and down completely randomly.

Pair Corralation between HCA Healthcare, and Healthcare Realty

Assuming the 90 days trading horizon HCA Healthcare, is expected to generate 1.13 times more return on investment than Healthcare Realty. However, HCA Healthcare, is 1.13 times more volatile than Healthcare Realty Trust. It trades about 0.1 of its potential returns per unit of risk. Healthcare Realty Trust is currently generating about 0.1 per unit of risk. If you would invest  5,686  in HCA Healthcare, on October 8, 2024 and sell it today you would earn a total of  3,304  from holding HCA Healthcare, or generate 58.11% return on investment over 90 days.

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

HCA Healthcare,  vs.  Healthcare Realty Trust

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.

Healthcare Realty Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Realty Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Healthcare Realty may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with HCA Healthcare, and Healthcare Realty

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

The idea behind HCA Healthcare, and Healthcare Realty Trust 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.