Correlation Between Global Medical and National Health

Can any of the company-specific risk be diversified away by investing in both Global Medical and National Health 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 Global Medical and National Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global Medical REIT and National Health Investors, you can compare the effects of market volatilities on Global Medical and National Health 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 Global Medical with a short position of National Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Medical and National Health.

Diversification Opportunities for Global Medical and National Health

0.55

Correlation Coefficient

Global Medical  National Health

Very weak diversification

The 3 months correlation between Global and National is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Global Medical REIT and National Health Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Health Investors and Global Medical 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 Global Medical REIT are associated (or correlated) with National Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Health Investors has no effect on the direction of Global Medical i.e., Global Medical and National Health go up and down completely randomly.

Pair Corralation between Global Medical and National Health

Given the investment horizon of 90 days Global Medical is expected to generate 3.44 times less return on investment than National Health. In addition to that, Global Medical is 1.22 times more volatile than National Health Investors. It trades about 0.02 of its total potential returns per unit of risk. National Health Investors is currently generating about 0.1 per unit of volatility. If you would invest  4,891  in National Health Investors on August 31, 2024 and sell it today you would earn a total of  2,774  from holding National Health Investors or generate 56.72% return on investment over 90 days.

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

Global Medical REIT  vs.  National Health Investors

Global Medical REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Medical REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Global Medical is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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. Despite fairly strong technical indicators, National Health is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Global Medical and National Health

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

The idea behind Global Medical REIT and National Health Investors 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.