Correlation Between National Health and HEINEKEN

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

Diversification Opportunities for National Health and HEINEKEN

0.02

Correlation Coefficient

National Health  HEINEKEN

Significant diversification

The 3 months correlation between National and HEINEKEN is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and HEINEKEN SP ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEINEKEN SP 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 HEINEKEN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEINEKEN SP ADR has no effect on the direction of National Health i.e., National Health and HEINEKEN go up and down completely randomly.

Pair Corralation between National Health and HEINEKEN

Assuming the 90 days trading horizon National Health Investors is expected to generate 1.78 times more return on investment than HEINEKEN. However, National Health is 1.78 times more volatile than HEINEKEN SP ADR. It trades about 0.01 of its potential returns per unit of risk. HEINEKEN SP ADR is currently generating about -0.19 per unit of risk. If you would invest  7,211  in National Health Investors on September 4, 2024 and sell it today you would earn a total of  39.00  from holding National Health Investors or generate 0.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

National Health Investors  vs.  HEINEKEN SP ADR

National Health Investors

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Health Investors are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

HEINEKEN SP ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEINEKEN SP ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with National Health and HEINEKEN

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

The idea behind National Health Investors and HEINEKEN SP 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..