Correlation Between National HealthCare and Healthcare Services

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

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

Diversification Opportunities for National HealthCare and Healthcare Services

0.44

Correlation Coefficient

National HealthCare  Healthcare Services

Very weak diversification

The 3 months correlation between National and Healthcare is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding National HealthCare and Healthcare Services Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare Services and National HealthCare 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 HealthCare are associated (or correlated) with Healthcare Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare Services has no effect on the direction of National HealthCare i.e., National HealthCare and Healthcare Services go up and down completely randomly.

Pair Corralation between National HealthCare and Healthcare Services

Considering the 90-day investment horizon National HealthCare is expected to under-perform the Healthcare Services. But the stock apears to be less risky and, when comparing its historical volatility, National HealthCare is 1.06 times less risky than Healthcare Services. The stock trades about -0.03 of its potential returns per unit of risk. The Healthcare Services Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,080  in Healthcare Services Group on August 31, 2024 and sell it today you would earn a total of  154.00  from holding Healthcare Services Group or generate 14.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

National HealthCare  vs.  Healthcare Services Group

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.

Healthcare Services

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Services Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Healthcare Services reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National HealthCare and Healthcare Services

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

The idea behind National HealthCare and Healthcare Services Group 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.