Correlation Between National Health and E3 LITHIUM

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Can any of the company-specific risk be diversified away by investing in both National Health and E3 LITHIUM 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 E3 LITHIUM 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 E3 LITHIUM LTD, you can compare the effects of market volatilities on National Health and E3 LITHIUM 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 E3 LITHIUM. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and E3 LITHIUM.

Diversification Opportunities for National Health and E3 LITHIUM

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between National and OW3 is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and E3 LITHIUM LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E3 LITHIUM LTD 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 E3 LITHIUM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E3 LITHIUM LTD has no effect on the direction of National Health i.e., National Health and E3 LITHIUM go up and down completely randomly.

Pair Corralation between National Health and E3 LITHIUM

Assuming the 90 days trading horizon National Health Investors is expected to generate 0.52 times more return on investment than E3 LITHIUM. However, National Health Investors is 1.92 times less risky than E3 LITHIUM. It trades about -0.05 of its potential returns per unit of risk. E3 LITHIUM LTD is currently generating about -0.04 per unit of risk. If you would invest  7,458  in National Health Investors on September 18, 2024 and sell it today you would lose (558.00) from holding National Health Investors or give up 7.48% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

National Health Investors  vs.  E3 LITHIUM LTD

 Performance 
       Timeline  
National Health Investors 

Risk-Adjusted Performance

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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.
E3 LITHIUM LTD 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days E3 LITHIUM LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

National Health and E3 LITHIUM Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with National Health and E3 LITHIUM

The main advantage of trading using opposite National Health and E3 LITHIUM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health position performs unexpectedly, E3 LITHIUM 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 E3 LITHIUM will offset losses from the drop in E3 LITHIUM's long position.
The idea behind National Health Investors and E3 LITHIUM LTD 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.

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