Correlation Between National HealthCare and Select Medical
Can any of the company-specific risk be diversified away by investing in both National HealthCare and Select 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 HealthCare and Select Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National HealthCare and Select Medical Holdings, you can compare the effects of market volatilities on National HealthCare and Select 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 HealthCare with a short position of Select Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of National HealthCare and Select Medical.
Diversification Opportunities for National HealthCare and Select Medical
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between National and Select is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding National HealthCare and Select Medical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Medical Holdings and National 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 National HealthCare are associated (or correlated) with Select Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Medical Holdings has no effect on the direction of National HealthCare i.e., National HealthCare and Select Medical go up and down completely randomly.
Pair Corralation between National HealthCare and Select Medical
Considering the 90-day investment horizon National HealthCare is expected to generate 7.69 times less return on investment than Select Medical. But when comparing it to its historical volatility, National HealthCare is 1.37 times less risky than Select Medical. It trades about 0.03 of its potential returns per unit of risk. Select Medical Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 2,826 in Select Medical Holdings on February 23, 2024 and sell it today you would earn a total of 575.00 from holding Select Medical Holdings or generate 20.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
National HealthCare vs. Select Medical Holdings
Performance |
Timeline |
National HealthCare |
Select Medical Holdings |
National HealthCare and Select Medical Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with National HealthCare and Select Medical
The main advantage of trading using opposite National HealthCare and Select Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National HealthCare position performs unexpectedly, Select 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 Select Medical will offset losses from the drop in Select Medical's long position.National HealthCare vs. Select Medical Holdings | National HealthCare vs. InnovAge Holding Corp | National HealthCare vs. Acadia Healthcare | National HealthCare vs. Healthcare Services Group |
Select Medical vs. InnovAge Holding Corp | Select Medical vs. Acadia Healthcare | Select Medical vs. Healthcare Services Group | Select Medical vs. Addus HomeCare |
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 CEOs Directory module to screen CEOs from public companies around the world.
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