Correlation Between National Health and Carsales
Can any of the company-specific risk be diversified away by investing in both National Health and Carsales 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 Carsales 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 CarsalesCom, you can compare the effects of market volatilities on National Health and Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and Carsales.
Diversification Opportunities for National Health and Carsales
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between National and Carsales is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom has no effect on the direction of National Health i.e., National Health and Carsales go up and down completely randomly.
Pair Corralation between National Health and Carsales
Assuming the 90 days trading horizon National Health is expected to generate 1.03 times less return on investment than Carsales. In addition to that, National Health is 1.0 times more volatile than CarsalesCom. It trades about 0.11 of its total potential returns per unit of risk. CarsalesCom is currently generating about 0.11 per unit of volatility. If you would invest 1,662 in CarsalesCom on September 4, 2024 and sell it today you would earn a total of 878.00 from holding CarsalesCom or generate 52.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
National Health Investors vs. CarsalesCom
Performance |
| Timeline |
| National Health Investors |
| CarsalesCom |
National Health and Carsales Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Health and Carsales
The main advantage of trading using opposite National Health and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health position performs unexpectedly, Carsales 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 Carsales will offset losses from the drop in Carsales' long position.| National Health vs. Apple Inc | National Health vs. Apple Inc | National Health vs. Apple Inc | National Health vs. Apple Inc |
| Carsales vs. BRIT AMER TOBACCO | Carsales vs. Japan Tobacco | Carsales vs. MICRONIC MYDATA | Carsales vs. FUYO GENERAL LEASE |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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