Correlation Between National Health and EastGroup Properties
Can any of the company-specific risk be diversified away by investing in both National Health and EastGroup Properties 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 EastGroup Properties 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 EastGroup Properties, you can compare the effects of market volatilities on National Health and EastGroup Properties 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 EastGroup Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and EastGroup Properties.
Diversification Opportunities for National Health and EastGroup Properties
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between National and EastGroup is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and EastGroup Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EastGroup Properties 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 EastGroup Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EastGroup Properties has no effect on the direction of National Health i.e., National Health and EastGroup Properties go up and down completely randomly.
Pair Corralation between National Health and EastGroup Properties
Considering the 90-day investment horizon National Health Investors is expected to under-perform the EastGroup Properties. But the stock apears to be less risky and, when comparing its historical volatility, National Health Investors is 1.14 times less risky than EastGroup Properties. The stock trades about -0.01 of its potential returns per unit of risk. The EastGroup Properties is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 16,302 in EastGroup Properties on March 12, 2024 and sell it today you would earn a total of 306.00 from holding EastGroup Properties or generate 1.88% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
National Health Investors vs. EastGroup Properties
Performance |
Timeline |
National Health Investors |
EastGroup Properties |
National Health and EastGroup Properties Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with National Health and EastGroup Properties
The main advantage of trading using opposite National Health and EastGroup Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health position performs unexpectedly, EastGroup Properties 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 EastGroup Properties will offset losses from the drop in EastGroup Properties' long position.The idea behind National Health Investors and EastGroup Properties 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.EastGroup Properties vs. Extra Space Storage | EastGroup Properties vs. Innovative Industrial Properties | EastGroup Properties vs. CubeSmart | EastGroup Properties vs. National Storage Affiliates |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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