Correlation Between National Health and PARKWAY LIFE

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

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

Diversification Opportunities for National Health and PARKWAY LIFE

0.04

Correlation Coefficient

National Health  PARKWAY LIFE

Significant diversification

The 3 months correlation between National and PARKWAY is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and PARKWAY LIFE REAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PARKWAY LIFE REAL and National Health 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 Health Investors are associated (or correlated) with PARKWAY LIFE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PARKWAY LIFE REAL has no effect on the direction of National Health i.e., National Health and PARKWAY LIFE go up and down completely randomly.

Pair Corralation between National Health and PARKWAY LIFE

Assuming the 90 days horizon National Health Investors is expected to under-perform the PARKWAY LIFE. But the stock apears to be less risky and, when comparing its historical volatility, National Health Investors is 1.49 times less risky than PARKWAY LIFE. The stock trades about -0.04 of its potential returns per unit of risk. The PARKWAY LIFE REAL is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  271.00  in PARKWAY LIFE REAL on October 12, 2024 and sell it today you would lose (12.00) from holding PARKWAY LIFE REAL or give up 4.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

National Health Investors  vs.  PARKWAY LIFE REAL

National Health Investors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Health Investors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, National Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PARKWAY LIFE REAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PARKWAY LIFE REAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PARKWAY LIFE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with National Health and PARKWAY LIFE

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

The idea behind National Health Investors and PARKWAY LIFE REAL 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.