Correlation Between Healthcare Services and National HealthCare

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

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

Diversification Opportunities for Healthcare Services and National HealthCare

0.64

Correlation Coefficient

Healthcare Services  National HealthCare

Poor diversification

The 3 months correlation between Healthcare and National is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Services Group and National HealthCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National HealthCare and Healthcare Services 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 Healthcare Services Group are associated (or correlated) with National HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National HealthCare has no effect on the direction of Healthcare Services i.e., Healthcare Services and National HealthCare go up and down completely randomly.

Pair Corralation between Healthcare Services and National HealthCare

Given the investment horizon of 90 days Healthcare Services Group is expected to generate 1.02 times more return on investment than National HealthCare. However, Healthcare Services is 1.02 times more volatile than National HealthCare. It trades about -0.09 of its potential returns per unit of risk. National HealthCare is currently generating about -0.13 per unit of risk. If you would invest  1,152  in Healthcare Services Group on December 30, 2024 and sell it today you would lose (117.00) from holding Healthcare Services Group or give up 10.16% of portfolio value over 90 days.

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

Healthcare Services Group  vs.  National HealthCare

Healthcare Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Healthcare Services Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

National HealthCare

Risk-Adjusted Performance

Very Weak

Over the last 90 days National HealthCare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Healthcare Services and National HealthCare

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

The idea behind Healthcare Services Group and National HealthCare 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.