Correlation Between HF FOODS and National Health

Can any of the company-specific risk be diversified away by investing in both HF FOODS and National Health 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 HF FOODS and National Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HF FOODS GRP and National Health Investors, you can compare the effects of market volatilities on HF FOODS and National Health 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 HF FOODS with a short position of National Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of HF FOODS and National Health.

Diversification Opportunities for HF FOODS and National Health

0.4

Correlation Coefficient

HF FOODS  National Health

Very weak diversification

The 3 months correlation between 3GX and National is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding HF FOODS GRP and National Health Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Health Investors and HF FOODS 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 HF FOODS GRP are associated (or correlated) with National Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Health Investors has no effect on the direction of HF FOODS i.e., HF FOODS and National Health go up and down completely randomly.

Pair Corralation between HF FOODS and National Health

Assuming the 90 days horizon HF FOODS GRP is expected to under-perform the National Health. In addition to that, HF FOODS is 1.42 times more volatile than National Health Investors. It trades about -0.44 of its total potential returns per unit of risk. National Health Investors is currently generating about 0.09 per unit of volatility. If you would invest  6,559  in National Health Investors on October 20, 2024 and sell it today you would earn a total of  141.00  from holding National Health Investors or generate 2.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

HF FOODS GRP  vs.  National Health Investors

HF FOODS GRP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HF FOODS GRP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

National Health Investors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Health Investors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, National Health is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HF FOODS and National Health

The main advantage of trading using opposite HF FOODS and National Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HF FOODS position performs unexpectedly, National Health 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 National Health will offset losses from the drop in National Health's long position.

The idea behind HF FOODS GRP and National Health Investors pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.