Correlation Between P3 Health and HCA Holdings

Can any of the company-specific risk be diversified away by investing in both P3 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 P3 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 P3 Health Partners and HCA Holdings, you can compare the effects of market volatilities on P3 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 P3 Health with a short position of HCA Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of P3 Health and HCA Holdings.

Diversification Opportunities for P3 Health and HCA Holdings

0.87

Correlation Coefficient

P3 Health  HCA Holdings

Very poor diversification

The 3 months correlation between PIII and HCA is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding P3 Health Partners and HCA Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCA Holdings and P3 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 P3 Health Partners 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 P3 Health i.e., P3 Health and HCA Holdings go up and down completely randomly.

Pair Corralation between P3 Health and HCA Holdings

Given the investment horizon of 90 days P3 Health Partners is expected to generate 5.17 times more return on investment than HCA Holdings. However, P3 Health is 5.17 times more volatile than HCA Holdings. It trades about -0.02 of its potential returns per unit of risk. HCA Holdings is currently generating about -0.31 per unit of risk. If you would invest  21.00  in P3 Health Partners on September 23, 2024 and sell it today you would lose (1.00) from holding P3 Health Partners or give up 4.76% of portfolio value over 90 days.

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

P3 Health Partners  vs.  HCA Holdings

P3 Health Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days P3 Health Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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 January 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with P3 Health and HCA Holdings

The main advantage of trading using opposite P3 Health and HCA Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if P3 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 P3 Health Partners 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.