Correlation Between National Health and TreeHouse Foods
Can any of the company-specific risk be diversified away by investing in both National Health and TreeHouse Foods 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 TreeHouse Foods 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 TreeHouse Foods, you can compare the effects of market volatilities on National Health and TreeHouse Foods 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 TreeHouse Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and TreeHouse Foods.
Diversification Opportunities for National Health and TreeHouse Foods
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between National and TreeHouse is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and TreeHouse Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TreeHouse Foods 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 TreeHouse Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TreeHouse Foods has no effect on the direction of National Health i.e., National Health and TreeHouse Foods go up and down completely randomly.
Pair Corralation between National Health and TreeHouse Foods
Assuming the 90 days trading horizon National Health Investors is expected to generate 0.64 times more return on investment than TreeHouse Foods. However, National Health Investors is 1.56 times less risky than TreeHouse Foods. It trades about 0.07 of its potential returns per unit of risk. TreeHouse Foods is currently generating about -0.01 per unit of risk. If you would invest 7,000 in National Health Investors on September 1, 2024 and sell it today you would earn a total of 250.00 from holding National Health Investors or generate 3.57% 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. TreeHouse Foods
Performance |
| Timeline |
| National Health Investors |
| TreeHouse Foods |
National Health and TreeHouse Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Health and TreeHouse Foods
The main advantage of trading using opposite National Health and TreeHouse Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health position performs unexpectedly, TreeHouse Foods 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 TreeHouse Foods will offset losses from the drop in TreeHouse Foods' long position.| National Health vs. NTG Nordic Transport | National Health vs. Transport International Holdings | National Health vs. EVS Broadcast Equipment | National Health vs. COPLAND ROAD CAPITAL |
| TreeHouse Foods vs. LEGACY IRON ORE | TreeHouse Foods vs. Reliance Steel Aluminum | TreeHouse Foods vs. Caltagirone SpA | TreeHouse Foods vs. REGAL ASIAN INVESTMENTS |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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