Correlation Between Acadia Healthcare and National HealthCare

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

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

Diversification Opportunities for Acadia Healthcare and National HealthCare

0.14

Correlation Coefficient

Acadia Healthcare  National HealthCare

Average diversification

The 3 months correlation between Acadia and National is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Healthcare and National HealthCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National HealthCare and Acadia Healthcare 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 Acadia Healthcare are associated (or correlated) with National HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National HealthCare has no effect on the direction of Acadia Healthcare i.e., Acadia Healthcare and National HealthCare go up and down completely randomly.

Pair Corralation between Acadia Healthcare and National HealthCare

Given the investment horizon of 90 days Acadia Healthcare is expected to under-perform the National HealthCare. In addition to that, Acadia Healthcare is 2.34 times more volatile than National HealthCare. It trades about -0.09 of its total potential returns per unit of risk. National HealthCare is currently generating about 0.32 per unit of volatility. If you would invest  9,118  in National HealthCare on February 23, 2024 and sell it today you would earn a total of  844.00  from holding National HealthCare or generate 9.26% return on investment over 90 days.

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

Acadia Healthcare  vs.  National HealthCare

Acadia Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acadia Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

National HealthCare

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National HealthCare are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, National HealthCare is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Acadia Healthcare and National HealthCare

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

The idea behind Acadia Healthcare and National HealthCare 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.

Check out your portfolio center.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.