Correlation Between CHINA TONTINE and National Health

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

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

Diversification Opportunities for CHINA TONTINE and National Health

0.0

Correlation Coefficient

CHINA TONTINE  National Health

Pay attention - limited upside

The 3 months correlation between CHINA and National is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding CHINA TONTINE WINES 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 CHINA TONTINE 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 CHINA TONTINE WINES 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 CHINA TONTINE i.e., CHINA TONTINE and National Health go up and down completely randomly.

Pair Corralation between CHINA TONTINE and National Health

Assuming the 90 days trading horizon CHINA TONTINE WINES is expected to generate 27.57 times more return on investment than National Health. However, CHINA TONTINE is 27.57 times more volatile than National Health Investors. It trades about 0.04 of its potential returns per unit of risk. National Health Investors is currently generating about 0.07 per unit of risk. If you would invest  0.70  in CHINA TONTINE WINES on December 4, 2024 and sell it today you would earn a total of  6.30  from holding CHINA TONTINE WINES or generate 900.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

CHINA TONTINE WINES  vs.  National Health Investors

CHINA TONTINE WINES

Risk-Adjusted Performance

Very Weak

Over the last 90 days CHINA TONTINE WINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, CHINA TONTINE is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

National Health Investors

Risk-Adjusted Performance

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CHINA TONTINE and National Health

The main advantage of trading using opposite CHINA TONTINE and National Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA TONTINE 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 CHINA TONTINE WINES 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.