Correlation Between HCA Holdings and Surgery Partners

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

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

Diversification Opportunities for HCA Holdings and Surgery Partners

0.61

Correlation Coefficient

HCA Holdings  Surgery Partners

Poor diversification

The 3 months correlation between HCA and Surgery is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding HCA Holdings and Surgery Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Surgery Partners 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 Surgery Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Surgery Partners has no effect on the direction of HCA Holdings i.e., HCA Holdings and Surgery Partners go up and down completely randomly.

Pair Corralation between HCA Holdings and Surgery Partners

Considering the 90-day investment horizon HCA Holdings is expected to generate 1.22 times less return on investment than Surgery Partners. But when comparing it to its historical volatility, HCA Holdings is 1.51 times less risky than Surgery Partners. It trades about 0.12 of its potential returns per unit of risk. Surgery Partners is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,057  in Surgery Partners on December 28, 2024 and sell it today you would earn a total of  355.00  from holding Surgery Partners or generate 17.26% return on investment over 90 days.

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

HCA Holdings  vs.  Surgery 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 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.

Surgery Partners

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Surgery Partners are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Surgery Partners showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HCA Holdings and Surgery Partners

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

The idea behind HCA Holdings and Surgery 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.