Correlation Between HCA Healthcare, and Norwegian Cruise

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

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

Diversification Opportunities for HCA Healthcare, and Norwegian Cruise

-0.72

Correlation Coefficient

HCA Healthcare,  Norwegian Cruise

Pay attention - limited upside

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

Pair Corralation between HCA Healthcare, and Norwegian Cruise

Assuming the 90 days trading horizon HCA Healthcare, is expected to generate 2.3 times less return on investment than Norwegian Cruise. But when comparing it to its historical volatility, HCA Healthcare, is 1.98 times less risky than Norwegian Cruise. It trades about 0.05 of its potential returns per unit of risk. Norwegian Cruise Line is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7,855  in Norwegian Cruise Line on October 5, 2024 and sell it today you would earn a total of  8,070  from holding Norwegian Cruise Line or generate 102.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.19%
Values	Daily Returns

HCA Healthcare,  vs.  Norwegian Cruise Line

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.

Norwegian Cruise Line

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Norwegian Cruise Line are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Norwegian Cruise sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HCA Healthcare, and Norwegian Cruise

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

The idea behind HCA Healthcare, and Norwegian Cruise Line 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.

Check out your portfolio center.

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.