Correlation Between HCA Holdings and Regional Health

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

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

Diversification Opportunities for HCA Holdings and Regional Health

0.37

Correlation Coefficient

HCA Holdings  Regional Health

Weak diversification

The 3 months correlation between HCA and Regional is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding HCA Holdings and Regional Health Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Health Prop 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 Regional Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Health Prop has no effect on the direction of HCA Holdings i.e., HCA Holdings and Regional Health go up and down completely randomly.

Pair Corralation between HCA Holdings and Regional Health

Considering the 90-day investment horizon HCA Holdings is expected to generate 0.24 times more return on investment than Regional Health. However, HCA Holdings is 4.14 times less risky than Regional Health. It trades about 0.04 of its potential returns per unit of risk. Regional Health Properties is currently generating about -0.07 per unit of risk. If you would invest  32,870  in HCA Holdings on November 29, 2024 and sell it today you would earn a total of  437.00  from holding HCA Holdings or generate 1.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	33.33%
Values	Daily Returns

HCA Holdings  vs.  Regional Health Properties

HCA Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HCA Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, HCA Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Regional Health Prop

Risk-Adjusted Performance

OK

Over the last 90 days Regional Health Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak technical indicators, Regional Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HCA Holdings and Regional Health

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

The idea behind HCA Holdings and Regional Health Properties 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.