Correlation Between National Health and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both National Health and Electronic Arts 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 Electronic Arts 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 Electronic Arts, you can compare the effects of market volatilities on National Health and Electronic Arts 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 Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and Electronic Arts.
Diversification Opportunities for National Health and Electronic Arts
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between National and Electronic is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts 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 Electronic Arts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Arts has no effect on the direction of National Health i.e., National Health and Electronic Arts go up and down completely randomly.
Pair Corralation between National Health and Electronic Arts
Assuming the 90 days trading horizon National Health Investors is expected to under-perform the Electronic Arts. In addition to that, National Health is 2.24 times more volatile than Electronic Arts. It trades about -0.02 of its total potential returns per unit of risk. Electronic Arts is currently generating about 0.46 per unit of volatility. If you would invest 12,890 in Electronic Arts on August 30, 2024 and sell it today you would earn a total of 2,843 from holding Electronic Arts or generate 22.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.73% |
| Values | Daily Returns |
National Health Investors vs. Electronic Arts
Performance |
| Timeline |
| National Health Investors |
| Electronic Arts |
National Health and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Health and Electronic Arts
The main advantage of trading using opposite National Health and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health position performs unexpectedly, Electronic Arts 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 Electronic Arts will offset losses from the drop in Electronic Arts' long position.| National Health vs. Apple Inc | National Health vs. Apple Inc | National Health vs. Apple Inc | National Health vs. Apple Inc |
| Electronic Arts vs. Apple Inc | Electronic Arts vs. Apple Inc | Electronic Arts vs. Superior Plus Corp | Electronic Arts vs. SIVERS SEMICONDUCTORS AB |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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