Correlation Between Option Care and National HealthCare
Can any of the company-specific risk be diversified away by investing in both Option Care 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 Option Care and National HealthCare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Option Care Health and National HealthCare, you can compare the effects of market volatilities on Option Care 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 Option Care with a short position of National HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Option Care and National HealthCare.
Diversification Opportunities for Option Care and National HealthCare
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Option and National is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Option Care Health and National HealthCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National HealthCare and Option Care 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 Option Care Health 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 Option Care i.e., Option Care and National HealthCare go up and down completely randomly.
Pair Corralation between Option Care and National HealthCare
Given the investment horizon of 90 days Option Care Health is expected to under-perform the National HealthCare. But the stock apears to be less risky and, when comparing its historical volatility, Option Care Health is 1.02 times less risky than National HealthCare. The stock trades about -0.01 of its potential returns per unit of risk. The National HealthCare is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 11,950 in National HealthCare on September 2, 2024 and sell it today you would earn a total of 570.00 from holding National HealthCare or generate 4.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Option Care Health vs. National HealthCare
Performance |
| Timeline |
| Option Care Health |
| National HealthCare |
Option Care and National HealthCare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Option Care and National HealthCare
The main advantage of trading using opposite Option Care and National HealthCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Option Care 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.| Option Care vs. Addus HomeCare | Option Care vs. Acadia Healthcare | Option Care vs. Encompass Health Corp | Option Care vs. Select Medical Holdings |
| 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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