Correlation Between RCABS and National Health
Can any of the company-specific risk be diversified away by investing in both RCABS 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 RCABS and National Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RCABS Inc and National Health Scan, you can compare the effects of market volatilities on RCABS 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 RCABS with a short position of National Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCABS and National Health.
Diversification Opportunities for RCABS and National Health
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between RCABS and National is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding RCABS Inc and National Health Scan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Health Scan and RCABS 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 RCABS Inc 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 Scan has no effect on the direction of RCABS i.e., RCABS and National Health go up and down completely randomly.
Pair Corralation between RCABS and National Health
Given the investment horizon of 90 days RCABS Inc is expected to under-perform the National Health. But the pink sheet apears to be less risky and, when comparing its historical volatility, RCABS Inc is 3.13 times less risky than National Health. The pink sheet trades about -0.08 of its potential returns per unit of risk. The National Health Scan is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1.80 in National Health Scan on August 31, 2024 and sell it today you would earn a total of 0.50 from holding National Health Scan or generate 27.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RCABS Inc vs. National Health Scan
Performance |
| Timeline |
| RCABS Inc |
| National Health Scan |
RCABS and National Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RCABS and National Health
The main advantage of trading using opposite RCABS and National Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCABS 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.The idea behind RCABS Inc and National Health Scan 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.| National Health vs. Emergent Health Corp | National Health vs. One World Universe | National Health vs. Nextmart | National Health vs. HeadsUp Entertainment International |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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