Correlation Between National Health and CVS Health
Can any of the company-specific risk be diversified away by investing in both National Health and CVS Health 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 CVS Health 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 CVS Health, you can compare the effects of market volatilities on National Health and CVS Health 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 CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and CVS Health.
Diversification Opportunities for National Health and CVS Health
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between National and CVS is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health 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 CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health has no effect on the direction of National Health i.e., National Health and CVS Health go up and down completely randomly.
Pair Corralation between National Health and CVS Health
Assuming the 90 days trading horizon National Health Investors is expected to generate 0.61 times more return on investment than CVS Health. However, National Health Investors is 1.63 times less risky than CVS Health. It trades about 0.12 of its potential returns per unit of risk. CVS Health is currently generating about -0.02 per unit of risk. If you would invest 5,355 in National Health Investors on September 3, 2024 and sell it today you would earn a total of 1,895 from holding National Health Investors or generate 35.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Health Investors vs. CVS Health
Performance |
| Timeline |
| National Health Investors |
| CVS Health |
National Health and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Health and CVS Health
The main advantage of trading using opposite National Health and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health position performs unexpectedly, CVS Health 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 CVS Health will offset losses from the drop in CVS Health's long position.| National Health vs. Apple Inc | National Health vs. Apple Inc | National Health vs. Apple Inc | National Health vs. Apple Inc |
| CVS Health vs. GFL ENVIRONM | CVS Health vs. Reliance Steel Aluminum | CVS Health vs. Chunghwa Telecom Co | CVS Health vs. BlueScope Steel Limited |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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