Correlation Between National Health and American Public

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

Diversification Opportunities for National Health and American Public

0.06

Correlation Coefficient

National Health  American Public

Significant diversification

The 3 months correlation between National and American is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and American Public Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Public Education 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 American Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Public Education has no effect on the direction of National Health i.e., National Health and American Public go up and down completely randomly.

Pair Corralation between National Health and American Public

Assuming the 90 days trading horizon National Health is expected to generate 3.9 times less return on investment than American Public. But when comparing it to its historical volatility, National Health Investors is 2.89 times less risky than American Public. It trades about 0.1 of its potential returns per unit of risk. American Public Education is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  496.00  in American Public Education on September 14, 2024 and sell it today you would earn a total of  1,604  from holding American Public Education or generate 323.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.64%
Values	Daily Returns

National Health Investors  vs.  American Public Education

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 comparatively stable basic indicators, National Health is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

American Public Education

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Public Education are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, American Public reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Health and American Public

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

The idea behind National Health Investors and American Public Education 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.