Correlation Between Realty Income and National Health
Can any of the company-specific risk be diversified away by investing in both Realty Income and National Health 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 Realty Income and National Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Realty Income and National Health Investors, you can compare the effects of market volatilities on Realty Income and National Health 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 Realty Income with a short position of National Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Realty Income and National Health.
Diversification Opportunities for Realty Income and National Health
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Realty and National is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income and National Health Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Health Investors and Realty Income 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 Realty Income are associated (or correlated) with National Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Health Investors has no effect on the direction of Realty Income i.e., Realty Income and National Health go up and down completely randomly.
Pair Corralation between Realty Income and National Health
Taking into account the 90-day investment horizon Realty Income is expected to under-perform the National Health. But the stock apears to be less risky and, when comparing its historical volatility, Realty Income is 1.23 times less risky than National Health. The stock trades about -0.02 of its potential returns per unit of risk. The National Health Investors is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 5,053 in National Health Investors on October 13, 2024 and sell it today you would earn a total of 1,569 from holding National Health Investors or generate 31.05% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Realty Income vs. National Health Investors
Performance |
Timeline |
Realty Income |
National Health Investors |
Realty Income and National Health Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Realty Income and National Health
The main advantage of trading using opposite Realty Income and National Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Realty Income position performs unexpectedly, National Health 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 Health will offset losses from the drop in National Health's long position.Realty Income vs. Federal Realty Investment | Realty Income vs. Macerich Company | Realty Income vs. National Retail Properties | Realty Income vs. Kimco Realty |
National Health vs. Global Medical REIT | National Health vs. Healthpeak Properties | National Health vs. Ventas Inc | National Health vs. Omega Healthcare Investors |
Check out your portfolio center.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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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