Correlation Between Healthcare Services and National HealthCare
Can any of the company-specific risk be diversified away by investing in both Healthcare Services 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 Healthcare Services and National HealthCare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Healthcare Services Group and National HealthCare, you can compare the effects of market volatilities on Healthcare Services 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 Healthcare Services with a short position of National HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Healthcare Services and National HealthCare.
Diversification Opportunities for Healthcare Services and National HealthCare
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Healthcare and National is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Services Group and National HealthCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National HealthCare and Healthcare Services 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 Healthcare Services Group 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 Healthcare Services i.e., Healthcare Services and National HealthCare go up and down completely randomly.
Pair Corralation between Healthcare Services and National HealthCare
Given the investment horizon of 90 days Healthcare Services Group is expected to generate 0.72 times more return on investment than National HealthCare. However, Healthcare Services Group is 1.39 times less risky than National HealthCare. It trades about 0.22 of its potential returns per unit of risk. National HealthCare is currently generating about 0.11 per unit of risk. If you would invest 1,095 in Healthcare Services Group on August 28, 2024 and sell it today you would earn a total of 98.00 from holding Healthcare Services Group or generate 8.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Healthcare Services Group vs. National HealthCare
Performance |
| Timeline |
| Healthcare Services |
| National HealthCare |
Healthcare Services and National HealthCare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Healthcare Services and National HealthCare
The main advantage of trading using opposite Healthcare Services and National HealthCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Healthcare Services 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.| Healthcare Services vs. Pennant Group | Healthcare Services vs. Surgery Partners | Healthcare Services vs. The Ensign Group | Healthcare Services vs. Encompass Health Corp |
| 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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