Correlation Between Oncology Institute and HCA Holdings

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

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

Diversification Opportunities for Oncology Institute and HCA Holdings

0.81

Correlation Coefficient

Oncology Institute  HCA Holdings

Very poor diversification

The 3 months correlation between Oncology and HCA is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Oncology Institute and HCA Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCA Holdings and Oncology Institute 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 Oncology Institute 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 Oncology Institute i.e., Oncology Institute and HCA Holdings go up and down completely randomly.

Pair Corralation between Oncology Institute and HCA Holdings

Considering the 90-day investment horizon Oncology Institute is expected to generate 4.5 times more return on investment than HCA Holdings. However, Oncology Institute is 4.5 times more volatile than HCA Holdings. It trades about 0.26 of its potential returns per unit of risk. HCA Holdings is currently generating about 0.11 per unit of risk. 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

Oncology Institute  vs.  HCA Holdings

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.

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.

Pair Trading with Oncology Institute and HCA Holdings

The main advantage of trading using opposite Oncology Institute and HCA Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oncology Institute 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 Oncology Institute 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.