Correlation Between National Health and Focus Home
Can any of the company-specific risk be diversified away by investing in both National Health and Focus Home 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 Focus Home 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 Focus Home Interactive, you can compare the effects of market volatilities on National Health and Focus Home 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 Focus Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and Focus Home.
Diversification Opportunities for National Health and Focus Home
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between National and Focus is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and Focus Home Interactive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Home Interactive 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 Focus Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Home Interactive has no effect on the direction of National Health i.e., National Health and Focus Home go up and down completely randomly.
Pair Corralation between National Health and Focus Home
Assuming the 90 days trading horizon National Health Investors is expected to generate 0.69 times more return on investment than Focus Home. However, National Health Investors is 1.45 times less risky than Focus Home. It trades about -0.05 of its potential returns per unit of risk. Focus Home Interactive is currently generating about -0.28 per unit of risk. If you would invest 6,650 in National Health Investors on November 6, 2024 and sell it today you would lose (150.00) from holding National Health Investors or give up 2.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Health Investors vs. Focus Home Interactive
Performance |
| Timeline |
| National Health Investors |
| Focus Home Interactive |
National Health and Focus Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Health and Focus Home
The main advantage of trading using opposite National Health and Focus Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health position performs unexpectedly, Focus Home 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 Focus Home will offset losses from the drop in Focus Home's long position.| National Health vs. DICKS Sporting Goods | National Health vs. HEMISPHERE EGY | National Health vs. COMPUTERSHARE | National Health vs. TELECOM ITALRISP ADR10 |
| Focus Home vs. TERADATA | Focus Home vs. H2O Retailing | Focus Home vs. Alliance Data Systems | Focus Home vs. Cleanaway Waste Management |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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