Correlation Between National Health and Healthcare Realty

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

Diversification Opportunities for National Health and Healthcare Realty

-0.5

Correlation Coefficient

National Health  Healthcare Realty

Very good diversification

The 3 months correlation between National and Healthcare is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and Healthcare Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare Realty Trust 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 Healthcare Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare Realty Trust has no effect on the direction of National Health i.e., National Health and Healthcare Realty go up and down completely randomly.

Pair Corralation between National Health and Healthcare Realty

Considering the 90-day investment horizon National Health is expected to generate 2.29 times less return on investment than Healthcare Realty. But when comparing it to its historical volatility, National Health Investors is 1.16 times less risky than Healthcare Realty. It trades about 0.08 of its potential returns per unit of risk. Healthcare Realty Trust is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,345  in Healthcare Realty Trust on January 24, 2024 and sell it today you would earn a total of  78.00  from holding Healthcare Realty Trust or generate 5.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.91%
Values	Daily Returns

National Health Investors  vs.  Healthcare Realty Trust

National Health Investors

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Health Investors are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, National Health demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Healthcare Realty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Healthcare Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with National Health and Healthcare Realty

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

The idea behind National Health Investors and Healthcare Realty Trust 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.