Correlation Between National Health and FAST RETAIL

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

Diversification Opportunities for National Health and FAST RETAIL

-0.49

Correlation Coefficient

National Health  FAST RETAIL

Very good diversification

The 3 months correlation between National and FAST is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and FAST RETAIL ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAST RETAIL ADR 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 FAST RETAIL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAST RETAIL ADR has no effect on the direction of National Health i.e., National Health and FAST RETAIL go up and down completely randomly.

Pair Corralation between National Health and FAST RETAIL

Assuming the 90 days trading horizon National Health Investors is expected to under-perform the FAST RETAIL. But the stock apears to be less risky and, when comparing its historical volatility, National Health Investors is 1.12 times less risky than FAST RETAIL. The stock trades about -0.24 of its potential returns per unit of risk. The FAST RETAIL ADR is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  3,300  in FAST RETAIL ADR on October 11, 2024 and sell it today you would lose (180.00) from holding FAST RETAIL ADR or give up 5.45% 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.  FAST RETAIL ADR

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 fragile 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.

FAST RETAIL ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind National Health Investors and FAST RETAIL ADR 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.