Correlation Between HCA Holdings and DaVita HealthCare

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

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

Diversification Opportunities for HCA Holdings and DaVita HealthCare

0.26

Correlation Coefficient

HCA Holdings  DaVita HealthCare

Modest diversification

The 3 months correlation between HCA and DaVita is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding HCA Holdings and DaVita HealthCare Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DaVita HealthCare and HCA Holdings 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 Holdings are associated (or correlated) with DaVita HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DaVita HealthCare has no effect on the direction of HCA Holdings i.e., HCA Holdings and DaVita HealthCare go up and down completely randomly.

Pair Corralation between HCA Holdings and DaVita HealthCare

Considering the 90-day investment horizon HCA Holdings is expected to generate 0.89 times more return on investment than DaVita HealthCare. However, HCA Holdings is 1.12 times less risky than DaVita HealthCare. It trades about 0.1 of its potential returns per unit of risk. DaVita HealthCare Partners is currently generating about 0.0 per unit of risk. If you would invest  30,184  in HCA Holdings on December 27, 2024 and sell it today you would earn a total of  3,545  from holding HCA Holdings or generate 11.74% return on investment over 90 days.

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

HCA Holdings  vs.  DaVita HealthCare Partners

HCA Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HCA Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, HCA Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

DaVita HealthCare

Risk-Adjusted Performance

Very Weak

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

Pair Trading with HCA Holdings and DaVita HealthCare

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

The idea behind HCA Holdings and DaVita HealthCare Partners 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.