Correlation Between Dow Jones and National Health
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and National Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and National Health Investors, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of National Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and National Health.
Diversification Opportunities for Dow Jones and National Health
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and National is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and National Health go up and down completely randomly.
Pair Corralation between Dow Jones and National Health
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.71 times more return on investment than National Health. However, Dow Jones Industrial is 1.41 times less risky than National Health. It trades about 0.29 of its potential returns per unit of risk. National Health Investors is currently generating about -0.06 per unit of risk. If you would invest 4,214,154 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 258,052 from holding Dow Jones Industrial or generate 6.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. National Health Investors
Performance |
| Timeline |
Dow Jones and National Health Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
National Health Investors
Pair trading matchups for National Health
Pair Trading with Dow Jones and National Health
The main advantage of trading using opposite Dow Jones and National Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
| National Health vs. LTC Properties | National Health vs. Omega Healthcare Investors | National Health vs. Ventas Inc | National Health vs. Community Healthcare Trust |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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