Correlation Between HCA Holdings and Oncology Institute

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

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

Diversification Opportunities for HCA Holdings and Oncology Institute

0.81

Correlation Coefficient

HCA Holdings  Oncology Institute

Very poor diversification

The 3 months correlation between HCA and Oncology is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding HCA Holdings and Oncology Institute in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oncology Institute 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 Oncology Institute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oncology Institute has no effect on the direction of HCA Holdings i.e., HCA Holdings and Oncology Institute go up and down completely randomly.

Pair Corralation between HCA Holdings and Oncology Institute

Considering the 90-day investment horizon HCA Holdings is expected to generate 10.85 times less return on investment than Oncology Institute. But when comparing it to its historical volatility, HCA Holdings is 4.5 times less risky than Oncology Institute. It trades about 0.11 of its potential returns per unit of risk. Oncology Institute is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  32.00  in Oncology Institute on December 27, 2024 and sell it today you would earn a total of  79.00  from holding Oncology Institute or generate 246.88% return on investment over 90 days.

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

HCA Holdings  vs.  Oncology Institute

HCA Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HCA Holdings are ranked lower than 8 (%) 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.

Oncology Institute

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Oncology Institute are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Oncology Institute demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HCA Holdings and Oncology Institute

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

The idea behind HCA Holdings and Oncology Institute 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..