Correlation Between Inspiration Healthcare and HCA Healthcare

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

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

Diversification Opportunities for Inspiration Healthcare and HCA Healthcare

0.58

Correlation Coefficient

Inspiration Healthcare  HCA Healthcare

Very weak diversification

The 3 months correlation between Inspiration and HCA is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Inspiration Healthcare Group and HCA Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCA Healthcare and Inspiration Healthcare 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 Inspiration Healthcare Group are associated (or correlated) with HCA Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCA Healthcare has no effect on the direction of Inspiration Healthcare i.e., Inspiration Healthcare and HCA Healthcare go up and down completely randomly.

Pair Corralation between Inspiration Healthcare and HCA Healthcare

Assuming the 90 days trading horizon Inspiration Healthcare Group is expected to under-perform the HCA Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Inspiration Healthcare Group is 2.06 times less risky than HCA Healthcare. The stock trades about -0.04 of its potential returns per unit of risk. The HCA Healthcare is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  24,145  in HCA Healthcare on September 3, 2024 and sell it today you would earn a total of  8,882  from holding HCA Healthcare or generate 36.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.0%
Values	Daily Returns

Inspiration Healthcare Group  vs.  HCA Healthcare

Inspiration Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inspiration Healthcare Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

HCA Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HCA Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Inspiration Healthcare and HCA Healthcare

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

The idea behind Inspiration Healthcare Group and HCA Healthcare 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.