Correlation Between Lyxor 1 and HCA Healthcare

Can any of the company-specific risk be diversified away by investing in both Lyxor 1 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 Lyxor 1 and HCA Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lyxor 1 and HCA Healthcare, you can compare the effects of market volatilities on Lyxor 1 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 Lyxor 1 with a short position of HCA Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor 1 and HCA Healthcare.

Diversification Opportunities for Lyxor 1 and HCA Healthcare

-0.43

Correlation Coefficient

Lyxor 1  HCA Healthcare

Very good diversification

The 3 months correlation between Lyxor and HCA is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and HCA Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCA Healthcare and Lyxor 1 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 Lyxor 1 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 Lyxor 1 i.e., Lyxor 1 and HCA Healthcare go up and down completely randomly.

Pair Corralation between Lyxor 1 and HCA Healthcare

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 0.44 times more return on investment than HCA Healthcare. However, Lyxor 1 is 2.28 times less risky than HCA Healthcare. It trades about 0.15 of its potential returns per unit of risk. HCA Healthcare is currently generating about -0.15 per unit of risk. If you would invest  2,389  in Lyxor 1 on September 14, 2024 and sell it today you would earn a total of  197.00  from holding Lyxor 1 or generate 8.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Lyxor 1   vs.  HCA Healthcare

Lyxor 1

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Lyxor 1 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Lyxor 1 and HCA Healthcare

The main advantage of trading using opposite Lyxor 1 and HCA Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor 1 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 Lyxor 1 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.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.