Correlation Between HCA Healthcare and Toyota

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

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

Diversification Opportunities for HCA Healthcare and Toyota

-0.47

Correlation Coefficient

HCA Healthcare  Toyota

Very good diversification

The 3 months correlation between HCA and Toyota is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding HCA Healthcare and Toyota Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor Corp 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 Toyota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Motor Corp has no effect on the direction of HCA Healthcare i.e., HCA Healthcare and Toyota go up and down completely randomly.

Pair Corralation between HCA Healthcare and Toyota

Assuming the 90 days trading horizon HCA Healthcare is expected to under-perform the Toyota. But the stock apears to be less risky and, when comparing its historical volatility, HCA Healthcare is 1.19 times less risky than Toyota. The stock trades about -0.14 of its potential returns per unit of risk. The Toyota Motor Corp is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  274,150  in Toyota Motor Corp on September 3, 2024 and sell it today you would lose (19,000) from holding Toyota Motor Corp or give up 6.93% of portfolio value over 90 days.

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

HCA Healthcare  vs.  Toyota Motor Corp

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.

Toyota Motor Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toyota Motor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Toyota 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 Toyota

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

The idea behind HCA Healthcare and Toyota Motor Corp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.