Correlation Between National Health and BJs Wholesale

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

Diversification Opportunities for National Health and BJs Wholesale

-0.31

Correlation Coefficient

National Health  BJs Wholesale

Very good diversification

The 3 months correlation between National and BJs is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and BJs Wholesale Club in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Wholesale Club 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 BJs Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BJs Wholesale Club has no effect on the direction of National Health i.e., National Health and BJs Wholesale go up and down completely randomly.

Pair Corralation between National Health and BJs Wholesale

Assuming the 90 days trading horizon National Health Investors is expected to under-perform the BJs Wholesale. But the stock apears to be less risky and, when comparing its historical volatility, National Health Investors is 1.0 times less risky than BJs Wholesale. The stock trades about 0.0 of its potential returns per unit of risk. The BJs Wholesale Club is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  8,950  in BJs Wholesale Club on December 5, 2024 and sell it today you would earn a total of  450.00  from holding BJs Wholesale Club or generate 5.03% return on investment over 90 days.

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

National Health Investors  vs.  BJs Wholesale Club

National Health Investors

Risk-Adjusted Performance

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

BJs Wholesale Club

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Wholesale Club are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BJs Wholesale is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with National Health and BJs Wholesale

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

The idea behind National Health Investors and BJs Wholesale Club 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.