Correlation Between National Health and NN

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

By analyzing existing cross correlation between National Health Scan and NN Inc, you can compare the effects of market volatilities on National Health and NN 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 NN. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and NN.

Diversification Opportunities for National Health and NN

-0.24

Correlation Coefficient

National Health  NN

Very good diversification

The 3 months correlation between National and NN is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding National Health Scan and NN Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NN Inc 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 Scan are associated (or correlated) with NN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NN Inc has no effect on the direction of National Health i.e., National Health and NN go up and down completely randomly.

Pair Corralation between National Health and NN

Given the investment horizon of 90 days National Health Scan is expected to generate 6.86 times more return on investment than NN. However, National Health is 6.86 times more volatile than NN Inc. It trades about 0.12 of its potential returns per unit of risk. NN Inc is currently generating about 0.06 per unit of risk. If you would invest  1.70  in National Health Scan on September 3, 2024 and sell it today you would earn a total of  0.60  from holding National Health Scan or generate 35.29% return on investment over 90 days.

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

National Health Scan  vs.  NN Inc

National Health Scan

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Health Scan are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, National Health reported solid returns over the last few months and may actually be approaching a breakup point.

NN Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NN Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, NN reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Health and NN

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

The idea behind National Health Scan and NN Inc 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.