Correlation Between National Health and Brother Industries
Can any of the company-specific risk be diversified away by investing in both National Health and Brother Industries 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 Brother Industries 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 Brother Industries, you can compare the effects of market volatilities on National Health and Brother Industries 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 Brother Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and Brother Industries.
Diversification Opportunities for National Health and Brother Industries
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between National and Brother is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and Brother Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brother Industries 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 Brother Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brother Industries has no effect on the direction of National Health i.e., National Health and Brother Industries go up and down completely randomly.
Pair Corralation between National Health and Brother Industries
Assuming the 90 days trading horizon National Health Investors is expected to generate 0.76 times more return on investment than Brother Industries. However, National Health Investors is 1.31 times less risky than Brother Industries. It trades about 0.1 of its potential returns per unit of risk. Brother Industries is currently generating about -0.01 per unit of risk. If you would invest 5,939 in National Health Investors on September 3, 2024 and sell it today you would earn a total of 1,311 from holding National Health Investors or generate 22.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Health Investors vs. Brother Industries
Performance |
| Timeline |
| National Health Investors |
| Brother Industries |
National Health and Brother Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Health and Brother Industries
The main advantage of trading using opposite National Health and Brother Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health position performs unexpectedly, Brother Industries 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 Brother Industries will offset losses from the drop in Brother Industries' long position.| National Health vs. Apple Inc | National Health vs. Apple Inc | National Health vs. Apple Inc | National Health vs. Apple Inc |
| Brother Industries vs. SHIP HEALTHCARE HLDGINC | Brother Industries vs. National Health Investors | Brother Industries vs. Diamondrock Hospitality Co | Brother Industries vs. Sekisui Chemical Co |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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