Correlation Between National Health and Microsoft
Can any of the company-specific risk be diversified away by investing in both National Health and Microsoft 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 Microsoft 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 Microsoft, you can compare the effects of market volatilities on National Health and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and Microsoft.
Diversification Opportunities for National Health and Microsoft
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between National and Microsoft is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of National Health i.e., National Health and Microsoft go up and down completely randomly.
Pair Corralation between National Health and Microsoft
Assuming the 90 days trading horizon National Health Investors is expected to generate 1.3 times more return on investment than Microsoft. However, National Health is 1.3 times more volatile than Microsoft. It trades about 0.12 of its potential returns per unit of risk. Microsoft is currently generating about 0.03 per unit of risk. If you would invest 5,744 in National Health Investors on August 28, 2024 and sell it today you would earn a total of 1,606 from holding National Health Investors or generate 27.96% 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. Microsoft
Performance |
| Timeline |
| National Health Investors |
| Microsoft |
National Health and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Health and Microsoft
The main advantage of trading using opposite National Health and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| National Health vs. LG Display Co | National Health vs. Ming Le Sports | National Health vs. USWE SPORTS AB | National Health vs. Gamma Communications plc |
| Microsoft vs. AGF Management Limited | Microsoft vs. CHINA EDUCATION GROUP | Microsoft vs. DeVry Education Group | Microsoft vs. Brockhaus Capital Management |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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