Correlation Between National Health and Fuyao Glass

Can any of the company-specific risk be diversified away by investing in both National Health and Fuyao Glass 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 Fuyao Glass 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 Fuyao Glass Industry, you can compare the effects of market volatilities on National Health and Fuyao Glass 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 Fuyao Glass. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and Fuyao Glass.

Diversification Opportunities for National Health and Fuyao Glass

-0.51

Correlation Coefficient

National Health  Fuyao Glass

Excellent diversification

The 3 months correlation between National and Fuyao is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and Fuyao Glass Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuyao Glass Industry 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 Fuyao Glass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuyao Glass Industry has no effect on the direction of National Health i.e., National Health and Fuyao Glass go up and down completely randomly.

Pair Corralation between National Health and Fuyao Glass

Assuming the 90 days trading horizon National Health Investors is expected to generate 1.35 times more return on investment than Fuyao Glass. However, National Health is 1.35 times more volatile than Fuyao Glass Industry. It trades about -0.03 of its potential returns per unit of risk. Fuyao Glass Industry is currently generating about -0.06 per unit of risk. If you would invest  6,856  in National Health Investors on October 6, 2024 and sell it today you would lose (206.00) from holding National Health Investors or give up 3.0% of portfolio value over 90 days.

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

National Health Investors  vs.  Fuyao Glass Industry

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. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Fuyao Glass Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fuyao Glass Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fuyao Glass 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 Fuyao Glass

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

The idea behind National Health Investors and Fuyao Glass Industry 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.