Correlation Between InnovAge Holding and National HealthCare

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

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

Diversification Opportunities for InnovAge Holding and National HealthCare

0.2

Correlation Coefficient

InnovAge Holding  National HealthCare

Modest diversification

The 3 months correlation between InnovAge and National is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding InnovAge Holding Corp and National HealthCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National HealthCare and InnovAge Holding 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 InnovAge Holding Corp 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 InnovAge Holding i.e., InnovAge Holding and National HealthCare go up and down completely randomly.

Pair Corralation between InnovAge Holding and National HealthCare

Given the investment horizon of 90 days InnovAge Holding Corp is expected to under-perform the National HealthCare. In addition to that, InnovAge Holding is 2.31 times more volatile than National HealthCare. It trades about 0.0 of its total potential returns per unit of risk. National HealthCare is currently generating about 0.11 per unit of volatility. If you would invest  5,267  in National HealthCare on August 31, 2024 and sell it today you would earn a total of  7,253  from holding National HealthCare or generate 137.71% return on investment over 90 days.

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

InnovAge Holding Corp  vs.  National HealthCare

InnovAge Holding Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InnovAge Holding Corp 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 basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

National HealthCare

Risk-Adjusted Performance

0 of 100

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 rather sound technical indicators, National HealthCare is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with InnovAge Holding and National HealthCare

The main advantage of trading using opposite InnovAge Holding and National HealthCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InnovAge Holding 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 InnovAge Holding Corp 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.