Correlation Between National Health and Mastercard
Can any of the company-specific risk be diversified away by investing in both National Health and Mastercard 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 Mastercard 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 Mastercard, you can compare the effects of market volatilities on National Health and Mastercard 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 Mastercard. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and Mastercard.
Diversification Opportunities for National Health and Mastercard
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between National and Mastercard is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and Mastercard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard 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 Mastercard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard has no effect on the direction of National Health i.e., National Health and Mastercard go up and down completely randomly.
Pair Corralation between National Health and Mastercard
Assuming the 90 days trading horizon National Health Investors is expected to generate 1.46 times more return on investment than Mastercard. However, National Health is 1.46 times more volatile than Mastercard. It trades about 0.1 of its potential returns per unit of risk. Mastercard is currently generating about 0.1 per unit of risk. If you would invest 4,800 in National Health Investors on September 12, 2024 and sell it today you would earn a total of 2,200 from holding National Health Investors or generate 45.83% 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. Mastercard
Performance |
| Timeline |
| National Health Investors |
| Mastercard |
National Health and Mastercard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Health and Mastercard
The main advantage of trading using opposite National Health and Mastercard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health position performs unexpectedly, Mastercard 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 Mastercard will offset losses from the drop in Mastercard's long position.| National Health vs. COSTCO WHOLESALE CDR | National Health vs. Titan Machinery | National Health vs. ALEFARM BREWING DK 05 | National Health vs. MARKET VECTR RETAIL |
| Mastercard vs. CVS Health | Mastercard vs. National Health Investors | Mastercard vs. ANTA SPORTS PRODUCT | Mastercard vs. Sporttotal AG |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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