Correlation Between National Health and Diversified Healthcare
Can any of the company-specific risk be diversified away by investing in both National Health and Diversified 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 National Health and Diversified Healthcare 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 Diversified Healthcare Trust, you can compare the effects of market volatilities on National Health and Diversified 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 National Health with a short position of Diversified Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and Diversified Healthcare.
Diversification Opportunities for National Health and Diversified Healthcare
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and Diversified is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and Diversified Healthcare Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Healthcare 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 Diversified Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Healthcare has no effect on the direction of National Health i.e., National Health and Diversified Healthcare go up and down completely randomly.
Pair Corralation between National Health and Diversified Healthcare
Considering the 90-day investment horizon National Health is expected to generate 14.19 times less return on investment than Diversified Healthcare. But when comparing it to its historical volatility, National Health Investors is 2.52 times less risky than Diversified Healthcare. It trades about 0.06 of its potential returns per unit of risk. Diversified Healthcare Trust is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 213.00 in Diversified Healthcare Trust on November 9, 2024 and sell it today you would earn a total of 58.00 from holding Diversified Healthcare Trust or generate 27.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Health Investors vs. Diversified Healthcare Trust
Performance |
| Timeline |
| National Health Investors |
| Diversified Healthcare |
National Health and Diversified Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Health and Diversified Healthcare
The main advantage of trading using opposite National Health and Diversified Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health position performs unexpectedly, Diversified 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 Diversified Healthcare will offset losses from the drop in Diversified Healthcare'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 |
| Diversified Healthcare vs. Global Medical REIT | Diversified Healthcare vs. Healthpeak Properties | Diversified Healthcare vs. Ventas Inc | Diversified Healthcare vs. National Health Investors |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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