Correlation Between NMC Health and HCA Holdings

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

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

Diversification Opportunities for NMC Health and HCA Holdings

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Correlation Coefficient

NMC Health  HCA Holdings

Pay attention - limited upside

The 3 months correlation between NMC and HCA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NMC Health PLC and HCA Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCA Holdings and NMC Health 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 NMC Health PLC are associated (or correlated) with HCA Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCA Holdings has no effect on the direction of NMC Health i.e., NMC Health and HCA Holdings go up and down completely randomly.

Pair Corralation between NMC Health and HCA Holdings

Assuming the 90 days horizon NMC Health PLC is expected to under-perform the HCA Holdings. In addition to that, NMC Health is 8.17 times more volatile than HCA Holdings. It trades about -0.11 of its total potential returns per unit of risk. HCA Holdings is currently generating about 0.03 per unit of volatility. If you would invest  25,399  in HCA Holdings on October 5, 2024 and sell it today you would earn a total of  4,616  from holding HCA Holdings or generate 18.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	26.32%
Values	Daily Returns

NMC Health PLC  vs.  HCA Holdings

NMC Health PLC

Risk-Adjusted Performance

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Very Weak

Over the last 90 days NMC Health PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, NMC Health is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

HCA Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HCA Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Etf's fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with NMC Health and HCA Holdings

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

The idea behind NMC Health PLC and HCA Holdings 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.