Correlation Between HCA Holdings and Pennant

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

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

Diversification Opportunities for HCA Holdings and Pennant

-0.11

Correlation Coefficient

HCA Holdings  Pennant

Good diversification

The 3 months correlation between HCA and Pennant is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding HCA Holdings and Pennant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pennant Group 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 Pennant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pennant Group has no effect on the direction of HCA Holdings i.e., HCA Holdings and Pennant go up and down completely randomly.

Pair Corralation between HCA Holdings and Pennant

Considering the 90-day investment horizon HCA Holdings is expected to generate 0.78 times more return on investment than Pennant. However, HCA Holdings is 1.28 times less risky than Pennant. It trades about 0.12 of its potential returns per unit of risk. Pennant Group is currently generating about -0.01 per unit of risk. If you would invest  29,775  in HCA Holdings on December 28, 2024 and sell it today you would earn a total of  4,459  from holding HCA Holdings or generate 14.98% return on investment over 90 days.

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

HCA Holdings  vs.  Pennant Group

HCA Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HCA Holdings are ranked lower than 9 (%) 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.

Pennant Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pennant Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Pennant is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HCA Holdings and Pennant

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

The idea behind HCA Holdings and Pennant Group 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.