Correlation Between National Health and Douglas Emmett
Can any of the company-specific risk be diversified away by investing in both National Health and Douglas Emmett 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 National Health and Douglas Emmett into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Health Investors and Douglas Emmett, you can compare the effects of market volatilities on National Health and Douglas Emmett 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 National Health with a short position of Douglas Emmett. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and Douglas Emmett.
Diversification Opportunities for National Health and Douglas Emmett
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between National and Douglas is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and Douglas Emmett in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Emmett and National 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 National Health Investors are associated (or correlated) with Douglas Emmett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Douglas Emmett has no effect on the direction of National Health i.e., National Health and Douglas Emmett go up and down completely randomly.
Pair Corralation between National Health and Douglas Emmett
Considering the 90-day investment horizon National Health is expected to generate 1.8 times less return on investment than Douglas Emmett. But when comparing it to its historical volatility, National Health Investors is 1.49 times less risky than Douglas Emmett. It trades about 0.12 of its potential returns per unit of risk. Douglas Emmett is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,355 in Douglas Emmett on September 3, 2024 and sell it today you would earn a total of 581.00 from holding Douglas Emmett or generate 42.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Health Investors vs. Douglas Emmett
Performance |
| Timeline |
| National Health Investors |
| Douglas Emmett |
National Health and Douglas Emmett Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Health and Douglas Emmett
The main advantage of trading using opposite National Health and Douglas Emmett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health position performs unexpectedly, Douglas Emmett 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 Douglas Emmett will offset losses from the drop in Douglas Emmett's long position.| National Health vs. Global Medical REIT | National Health vs. Healthpeak Properties | National Health vs. Ventas Inc | National Health vs. Omega Healthcare Investors |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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