Correlation Between HCA Healthcare and Ebro Foods

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

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

Diversification Opportunities for HCA Healthcare and Ebro Foods

0.15

Correlation Coefficient

HCA Healthcare  Ebro Foods

Average diversification

The 3 months correlation between HCA and Ebro is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding HCA Healthcare and Ebro Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebro Foods and HCA Healthcare 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 HCA Healthcare are associated (or correlated) with Ebro Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ebro Foods has no effect on the direction of HCA Healthcare i.e., HCA Healthcare and Ebro Foods go up and down completely randomly.

Pair Corralation between HCA Healthcare and Ebro Foods

Assuming the 90 days trading horizon HCA Healthcare is expected to under-perform the Ebro Foods. In addition to that, HCA Healthcare is 1.82 times more volatile than Ebro Foods. It trades about -0.36 of its total potential returns per unit of risk. Ebro Foods is currently generating about -0.04 per unit of volatility. If you would invest  1,596  in Ebro Foods on September 27, 2024 and sell it today you would lose (8.00) from holding Ebro Foods or give up 0.5% of portfolio value over 90 days.

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

HCA Healthcare  vs.  Ebro Foods

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.

Ebro Foods

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ebro Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Ebro Foods is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with HCA Healthcare and Ebro Foods

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

The idea behind HCA Healthcare and Ebro Foods 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.