Correlation Between National Health and Nucor
Can any of the company-specific risk be diversified away by investing in both National Health and Nucor 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 Nucor 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 Nucor, you can compare the effects of market volatilities on National Health and Nucor 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 Nucor. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and Nucor.
Diversification Opportunities for National Health and Nucor
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between National and Nucor is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and Nucor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor 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 Nucor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nucor has no effect on the direction of National Health i.e., National Health and Nucor go up and down completely randomly.
Pair Corralation between National Health and Nucor
Assuming the 90 days trading horizon National Health is expected to generate 5.73 times less return on investment than Nucor. But when comparing it to its historical volatility, National Health Investors is 1.65 times less risky than Nucor. It trades about 0.04 of its potential returns per unit of risk. Nucor is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 13,178 in Nucor on August 31, 2024 and sell it today you would earn a total of 1,488 from holding Nucor or generate 11.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
National Health Investors vs. Nucor
Performance |
| Timeline |
| National Health Investors |
| Nucor |
National Health and Nucor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Health and Nucor
The main advantage of trading using opposite National Health and Nucor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health position performs unexpectedly, Nucor 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 Nucor will offset losses from the drop in Nucor's long position.| National Health vs. Apple Inc | National Health vs. Apple Inc | National Health vs. Apple Inc | National Health vs. Apple Inc |
| Nucor vs. BlueScope Steel Limited | Nucor vs. ALGOMA STEEL GROUP | Nucor vs. BW OFFSHORE LTD | Nucor vs. Eidesvik Offshore ASA |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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