Correlation Between National Health and COMMERCIAL VEHICLE
Can any of the company-specific risk be diversified away by investing in both National Health and COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE, you can compare the effects of market volatilities on National Health and COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and COMMERCIAL VEHICLE.
Diversification Opportunities for National Health and COMMERCIAL VEHICLE
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between National and COMMERCIAL is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and COMMERCIAL VEHICLE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMMERCIAL VEHICLE has no effect on the direction of National Health i.e., National Health and COMMERCIAL VEHICLE go up and down completely randomly.
Pair Corralation between National Health and COMMERCIAL VEHICLE
Assuming the 90 days trading horizon National Health Investors is expected to generate 0.46 times more return on investment than COMMERCIAL VEHICLE. However, National Health Investors is 2.16 times less risky than COMMERCIAL VEHICLE. It trades about 0.11 of its potential returns per unit of risk. COMMERCIAL VEHICLE is currently generating about -0.1 per unit of risk. If you would invest 4,800 in National Health Investors on September 4, 2024 and sell it today you would earn a total of 2,450 from holding National Health Investors or generate 51.04% 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. COMMERCIAL VEHICLE
Performance |
| Timeline |
| National Health Investors |
| COMMERCIAL VEHICLE |
National Health and COMMERCIAL VEHICLE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Health and COMMERCIAL VEHICLE
The main advantage of trading using opposite National Health and COMMERCIAL VEHICLE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health position performs unexpectedly, COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE will offset losses from the drop in COMMERCIAL VEHICLE's long position.| National Health vs. Apple Inc | National Health vs. Apple Inc | National Health vs. Apple Inc | National Health vs. Apple Inc |
| COMMERCIAL VEHICLE vs. TOTAL GABON | COMMERCIAL VEHICLE vs. Walgreens Boots Alliance | COMMERCIAL VEHICLE vs. Peak Resources 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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