Correlation Between National Health and Ventas

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

Diversification Opportunities for National Health and Ventas

-0.67

Correlation Coefficient

National Health  Ventas

Excellent diversification

The 3 months correlation between National and Ventas is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and Ventas Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ventas Inc 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 Ventas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ventas Inc has no effect on the direction of National Health i.e., National Health and Ventas go up and down completely randomly.

Pair Corralation between National Health and Ventas

Considering the 90-day investment horizon National Health Investors is expected to generate 0.93 times more return on investment than Ventas. However, National Health Investors is 1.08 times less risky than Ventas. It trades about 0.14 of its potential returns per unit of risk. Ventas Inc is currently generating about 0.03 per unit of risk. If you would invest  4,715  in National Health Investors on January 20, 2024 and sell it today you would earn a total of  1,329  from holding National Health Investors or generate 28.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.2%
Values	Daily Returns

National Health Investors  vs.  Ventas Inc

National Health Investors

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Health Investors are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical indicators, National Health may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Ventas Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ventas Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting 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 Ventas

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

The idea behind National Health Investors and Ventas Inc 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.