Correlation Between National Health and CITY OFFICE
Can any of the company-specific risk be diversified away by investing in both National Health and CITY OFFICE 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 CITY OFFICE 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 CITY OFFICE REIT, you can compare the effects of market volatilities on National Health and CITY OFFICE 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 CITY OFFICE. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and CITY OFFICE.
Diversification Opportunities for National Health and CITY OFFICE
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between National and CITY is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and CITY OFFICE REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITY OFFICE REIT 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 CITY OFFICE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITY OFFICE REIT has no effect on the direction of National Health i.e., National Health and CITY OFFICE go up and down completely randomly.
Pair Corralation between National Health and CITY OFFICE
Assuming the 90 days trading horizon National Health is expected to generate 2.18 times less return on investment than CITY OFFICE. But when comparing it to its historical volatility, National Health Investors is 1.42 times less risky than CITY OFFICE. It trades about 0.03 of its potential returns per unit of risk. CITY OFFICE REIT is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 495.00 in CITY OFFICE REIT on September 3, 2024 and sell it today you would earn a total of 30.00 from holding CITY OFFICE REIT or generate 6.06% 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. CITY OFFICE REIT
Performance |
| Timeline |
| National Health Investors |
| CITY OFFICE REIT |
National Health and CITY OFFICE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Health and CITY OFFICE
The main advantage of trading using opposite National Health and CITY OFFICE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health position performs unexpectedly, CITY OFFICE 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 CITY OFFICE will offset losses from the drop in CITY OFFICE's long position.| National Health vs. Apple Inc | National Health vs. Apple Inc | National Health vs. Apple Inc | National Health vs. Apple Inc |
| CITY OFFICE vs. Boston Properties | CITY OFFICE vs. COUSINS PTIES INC | CITY OFFICE vs. Office Properties Income | CITY OFFICE vs. CREMECOMTRSBI DL 001 |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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