Correlation Between RTW Venture and HCA Healthcare

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

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

Diversification Opportunities for RTW Venture and HCA Healthcare

-0.52

Correlation Coefficient

RTW Venture  HCA Healthcare

Excellent diversification

The 3 months correlation between RTW and HCA is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding RTW Venture Fund and HCA Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCA Healthcare and RTW Venture 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 RTW Venture Fund 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 RTW Venture i.e., RTW Venture and HCA Healthcare go up and down completely randomly.

Pair Corralation between RTW Venture and HCA Healthcare

Assuming the 90 days trading horizon RTW Venture Fund is expected to under-perform the HCA Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, RTW Venture Fund is 1.52 times less risky than HCA Healthcare. The stock trades about -0.15 of its potential returns per unit of risk. The HCA Healthcare is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  29,855  in HCA Healthcare on December 29, 2024 and sell it today you would earn a total of  4,394  from holding HCA Healthcare or generate 14.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

RTW Venture Fund  vs.  HCA Healthcare

RTW Venture Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days RTW Venture Fund 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

HCA Healthcare

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HCA Healthcare are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, HCA Healthcare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RTW Venture and HCA Healthcare

The main advantage of trading using opposite RTW Venture and HCA Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RTW Venture 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 RTW Venture Fund 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.