Correlation Between National Health and Japan Medical

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

Diversification Opportunities for National Health and Japan Medical

0.34

Correlation Coefficient

National Health  Japan Medical

Weak diversification

The 3 months correlation between National and Japan is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and Japan Medical Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Medical Dynamic 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 Japan Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Medical Dynamic has no effect on the direction of National Health i.e., National Health and Japan Medical go up and down completely randomly.

Pair Corralation between National Health and Japan Medical

Assuming the 90 days trading horizon National Health Investors is expected to under-perform the Japan Medical. But the stock apears to be less risky and, when comparing its historical volatility, National Health Investors is 1.19 times less risky than Japan Medical. The stock trades about -0.25 of its potential returns per unit of risk. The Japan Medical Dynamic is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  368.00  in Japan Medical Dynamic on September 13, 2024 and sell it today you would earn a total of  2.00  from holding Japan Medical Dynamic or generate 0.54% return on investment over 90 days.

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

National Health Investors  vs.  Japan Medical Dynamic

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 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.

Japan Medical Dynamic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Medical Dynamic 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 basic indicators 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 Japan Medical

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

The idea behind National Health Investors and Japan Medical Dynamic 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..