Correlation Between Solstad Offshore and HCA Healthcare

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

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

Diversification Opportunities for Solstad Offshore and HCA Healthcare

-0.69

Correlation Coefficient

Solstad Offshore  HCA Healthcare

Excellent diversification

The 3 months correlation between Solstad and HCA is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offshore ASA and HCA Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCA Healthcare and Solstad Offshore 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 Solstad Offshore ASA 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 Solstad Offshore i.e., Solstad Offshore and HCA Healthcare go up and down completely randomly.

Pair Corralation between Solstad Offshore and HCA Healthcare

Assuming the 90 days trading horizon Solstad Offshore ASA is expected to generate 2.68 times more return on investment than HCA Healthcare. However, Solstad Offshore is 2.68 times more volatile than HCA Healthcare. It trades about -0.11 of its potential returns per unit of risk. HCA Healthcare is currently generating about -0.36 per unit of risk. If you would invest  4,198  in Solstad Offshore ASA on September 27, 2024 and sell it today you would lose (276.00) from holding Solstad Offshore ASA or give up 6.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Solstad Offshore ASA  vs.  HCA Healthcare

Solstad Offshore ASA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solstad Offshore ASA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Solstad Offshore unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain 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 Solstad Offshore and HCA Healthcare

The main advantage of trading using opposite Solstad Offshore and HCA Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solstad Offshore 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 Solstad Offshore ASA 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.