Correlation Between Commercial National and Global Healthcare

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

By analyzing existing cross correlation between Commercial National Financial and Global Healthcare REIT, you can compare the effects of market volatilities on Commercial National and Global Healthcare 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 Commercial National with a short position of Global Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commercial National and Global Healthcare.

Diversification Opportunities for Commercial National and Global Healthcare

0.47

Correlation Coefficient

Commercial National  Global Healthcare

Very weak diversification

The 3 months correlation between Commercial and Global is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Commercial National Financial and Global Healthcare REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Healthcare REIT and Commercial National 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 Commercial National Financial are associated (or correlated) with Global Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Healthcare REIT has no effect on the direction of Commercial National i.e., Commercial National and Global Healthcare go up and down completely randomly.

Pair Corralation between Commercial National and Global Healthcare

Given the investment horizon of 90 days Commercial National is expected to generate 8.79 times less return on investment than Global Healthcare. But when comparing it to its historical volatility, Commercial National Financial is 10.68 times less risky than Global Healthcare. It trades about 0.12 of its potential returns per unit of risk. Global Healthcare REIT is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  200.00  in Global Healthcare REIT on December 6, 2024 and sell it today you would earn a total of  25.00  from holding Global Healthcare REIT or generate 12.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Commercial National Financial  vs.  Global Healthcare REIT

Commercial National

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Commercial National Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Commercial National may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Global Healthcare REIT

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Healthcare REIT are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal fundamental indicators, Global Healthcare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Commercial National and Global Healthcare

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

The idea behind Commercial National Financial and Global Healthcare REIT 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.