Correlation Between Alphabet and HCA Holdings

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

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

Diversification Opportunities for Alphabet and HCA Holdings

-0.64

Correlation Coefficient

Alphabet  HCA Holdings

Excellent diversification

The 3 months correlation between Alphabet and HCA is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and HCA Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCA Holdings and Alphabet 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 Alphabet Inc Class C are associated (or correlated) with HCA Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCA Holdings has no effect on the direction of Alphabet i.e., Alphabet and HCA Holdings go up and down completely randomly.

Pair Corralation between Alphabet and HCA Holdings

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.31 times more return on investment than HCA Holdings. However, Alphabet is 1.31 times more volatile than HCA Holdings. It trades about -0.02 of its potential returns per unit of risk. HCA Holdings is currently generating about -0.28 per unit of risk. If you would invest  16,834  in Alphabet Inc Class C on August 27, 2024 and sell it today you would lose (177.00) from holding Alphabet Inc Class C or give up 1.05% of portfolio value over 90 days.

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

Alphabet Inc Class C  vs.  HCA Holdings

Alphabet Class C

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alphabet Inc Class C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Alphabet is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

HCA Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HCA Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Etf's fundamental indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with Alphabet and HCA Holdings

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

The idea behind Alphabet Inc Class C and HCA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.