Correlation Between National Health and Advanced Medical
Can any of the company-specific risk be diversified away by investing in both National Health and Advanced Medical 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 Advanced Medical 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 Advanced Medical Solutions, you can compare the effects of market volatilities on National Health and Advanced Medical 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 Advanced Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and Advanced Medical.
Diversification Opportunities for National Health and Advanced Medical
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between National and Advanced is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and Advanced Medical Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Medical Sol 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 Advanced Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Medical Sol has no effect on the direction of National Health i.e., National Health and Advanced Medical go up and down completely randomly.
Pair Corralation between National Health and Advanced Medical
Assuming the 90 days trading horizon National Health Investors is expected to generate 0.88 times more return on investment than Advanced Medical. However, National Health Investors is 1.13 times less risky than Advanced Medical. It trades about 0.11 of its potential returns per unit of risk. Advanced Medical Solutions is currently generating about -0.08 per unit of risk. If you would invest 6,850 in National Health Investors on September 3, 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Health Investors vs. Advanced Medical Solutions
Performance |
| Timeline |
| National Health Investors |
| Advanced Medical Sol |
National Health and Advanced Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Health and Advanced Medical
The main advantage of trading using opposite National Health and Advanced Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health position performs unexpectedly, Advanced Medical 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 Advanced Medical will offset losses from the drop in Advanced Medical's long position.| National Health vs. Apple Inc | National Health vs. Apple Inc | National Health vs. Apple Inc | National Health vs. Apple Inc |
| Advanced Medical vs. National Health Investors | Advanced Medical vs. STRAYER EDUCATION | Advanced Medical vs. EHEALTH | Advanced Medical vs. Sabra Health Care |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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