Correlation Between HCA Healthcare and European Metals

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

By analyzing existing cross correlation between HCA Healthcare and European Metals Holdings, you can compare the effects of market volatilities on HCA Healthcare and European Metals 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 European Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of HCA Healthcare and European Metals.

Diversification Opportunities for HCA Healthcare and European Metals

0.73

Correlation Coefficient

HCA Healthcare  European Metals

Poor diversification

The 3 months correlation between HCA and European is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding HCA Healthcare and European Metals Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Metals Holdings 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 European Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Metals Holdings has no effect on the direction of HCA Healthcare i.e., HCA Healthcare and European Metals go up and down completely randomly.

Pair Corralation between HCA Healthcare and European Metals

Assuming the 90 days trading horizon HCA Healthcare is expected to under-perform the European Metals. But the stock apears to be less risky and, when comparing its historical volatility, HCA Healthcare is 2.56 times less risky than European Metals. The stock trades about -0.32 of its potential returns per unit of risk. The European Metals Holdings is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  750.00  in European Metals Holdings on September 23, 2024 and sell it today you would lose (25.00) from holding European Metals Holdings or give up 3.33% of portfolio value over 90 days.

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

HCA Healthcare  vs.  European Metals Holdings

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 unsteady 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.

European Metals Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in European Metals Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, European Metals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with HCA Healthcare and European Metals

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

The idea behind HCA Healthcare and European Metals 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.