Correlation Between National Health and Dow Jones
Can any of the company-specific risk be diversified away by investing in both National Health and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on National Health and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and Dow Jones.
Diversification Opportunities for National Health and Dow Jones
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between National and Dow is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of National Health i.e., National Health and Dow Jones go up and down completely randomly.
Pair Corralation between National Health and Dow Jones
Assuming the 90 days horizon National Health Investors is expected to generate 1.78 times more return on investment than Dow Jones. However, National Health is 1.78 times more volatile than Dow Jones Industrial. It trades about 0.15 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.26 per unit of risk. If you would invest 6,850 in National Health Investors on August 29, 2024 and sell it today you would earn a total of 400.00 from holding National Health Investors or generate 5.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Health Investors vs. Dow Jones Industrial
Performance |
| Timeline |
National Health and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
National Health Investors
Pair trading matchups for National Health
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with National Health and Dow Jones
The main advantage of trading using opposite National Health and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| National Health vs. Seven West Media | National Health vs. Goosehead Insurance | National Health vs. QBE Insurance Group | National Health vs. Zurich Insurance Group |
| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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