Correlation Between HEALTHCARE REAL and National Storage

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

By analyzing existing cross correlation between HEALTHCARE REAL A and National Storage Affiliates, you can compare the effects of market volatilities on HEALTHCARE REAL and National Storage 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 REAL with a short position of National Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of HEALTHCARE REAL and National Storage.

Diversification Opportunities for HEALTHCARE REAL and National Storage

0.88

Correlation Coefficient

HEALTHCARE REAL  National Storage

Very poor diversification

The 3 months correlation between HEALTHCARE and National is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding HEALTHCARE REAL A and National Storage Affiliates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Storage Aff and HEALTHCARE REAL 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 REAL A are associated (or correlated) with National Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Storage Aff has no effect on the direction of HEALTHCARE REAL i.e., HEALTHCARE REAL and National Storage go up and down completely randomly.

Pair Corralation between HEALTHCARE REAL and National Storage

Assuming the 90 days horizon HEALTHCARE REAL is expected to generate 1.32 times less return on investment than National Storage. But when comparing it to its historical volatility, HEALTHCARE REAL A is 1.09 times less risky than National Storage. It trades about 0.04 of its potential returns per unit of risk. National Storage Affiliates is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,897  in National Storage Affiliates on December 2, 2024 and sell it today you would earn a total of  833.00  from holding National Storage Affiliates or generate 28.75% return on investment over 90 days.

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

HEALTHCARE REAL A  vs.  National Storage Affiliates

HEALTHCARE REAL A

Risk-Adjusted Performance

Very Weak

Over the last 90 days HEALTHCARE REAL A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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 Storage Aff

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Storage Affiliates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

Pair Trading with HEALTHCARE REAL and National Storage

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

The idea behind HEALTHCARE REAL A and National Storage Affiliates 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.