Correlation Between Advanced Medical and National Health
Can any of the company-specific risk be diversified away by investing in both Advanced Medical and National Health 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 Advanced Medical and National Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Medical Solutions and National Health Investors, you can compare the effects of market volatilities on Advanced Medical and National Health 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 Advanced Medical with a short position of National Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Medical and National Health.
Diversification Opportunities for Advanced Medical and National Health
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Advanced and National is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Medical Solutions and National Health Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Health Investors and Advanced Medical 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 Advanced Medical Solutions are associated (or correlated) with National Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Health Investors has no effect on the direction of Advanced Medical i.e., Advanced Medical and National Health go up and down completely randomly.
Pair Corralation between Advanced Medical and National Health
Assuming the 90 days trading horizon Advanced Medical Solutions is expected to generate 2.1 times more return on investment than National Health. However, Advanced Medical is 2.1 times more volatile than National Health Investors. It trades about 0.09 of its potential returns per unit of risk. National Health Investors is currently generating about 0.16 per unit of risk. If you would invest 226.00 in Advanced Medical Solutions on August 29, 2024 and sell it today you would earn a total of 14.00 from holding Advanced Medical Solutions or generate 6.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advanced Medical Solutions vs. National Health Investors
Performance |
| Timeline |
| Advanced Medical Sol |
| National Health Investors |
Advanced Medical and National Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Medical and National Health
The main advantage of trading using opposite Advanced Medical and National Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Medical position performs unexpectedly, National Health 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 National Health will offset losses from the drop in National Health's long position.| Advanced Medical vs. Apple Inc | Advanced Medical vs. Apple Inc | Advanced Medical vs. Apple Inc | Advanced Medical vs. Apple Inc |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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