Correlation Between Community Health and National HealthCare
Can any of the company-specific risk be diversified away by investing in both Community Health and National 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 Community Health and National HealthCare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Community Health Systems and National HealthCare, you can compare the effects of market volatilities on Community Health and National 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 Community Health with a short position of National HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community Health and National HealthCare.
Diversification Opportunities for Community Health and National HealthCare
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Community and National is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Community Health Systems and National HealthCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National HealthCare and Community Health 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 Community Health Systems are associated (or correlated) with National HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National HealthCare has no effect on the direction of Community Health i.e., Community Health and National HealthCare go up and down completely randomly.
Pair Corralation between Community Health and National HealthCare
Considering the 90-day investment horizon Community Health is expected to generate 2.81 times less return on investment than National HealthCare. In addition to that, Community Health is 2.46 times more volatile than National HealthCare. It trades about 0.02 of its total potential returns per unit of risk. National HealthCare is currently generating about 0.12 per unit of volatility. If you would invest 6,039 in National HealthCare on August 31, 2024 and sell it today you would earn a total of 6,481 from holding National HealthCare or generate 107.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Community Health Systems vs. National HealthCare
Performance |
| Timeline |
| Community Health Systems |
| National HealthCare |
Community Health and National HealthCare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community Health and National HealthCare
The main advantage of trading using opposite Community Health and National HealthCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community Health position performs unexpectedly, National 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 National HealthCare will offset losses from the drop in National HealthCare's long position.| Community Health vs. Universal Health Services | Community Health vs. HCA Holdings | Community Health vs. Surgery Partners | Community Health vs. Acadia Healthcare |
| National HealthCare vs. The Ensign Group | National HealthCare vs. US Physicalrapy | National HealthCare vs. Cass Information Systems | National HealthCare vs. Brookdale Senior Living |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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