Correlation Between Nasdaq and National Health

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

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

Diversification Opportunities for Nasdaq and National Health

-0.75

Correlation Coefficient

Nasdaq  National Health

Pay attention - limited upside

The 3 months correlation between Nasdaq and National is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and National Health Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Health Investors and Nasdaq 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 Nasdaq Inc are associated (or correlated) with National Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Health Investors has no effect on the direction of Nasdaq i.e., Nasdaq and National Health go up and down completely randomly.

Pair Corralation between Nasdaq and National Health

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.99 times more return on investment than National Health. However, Nasdaq Inc is 1.01 times less risky than National Health. It trades about 0.3 of its potential returns per unit of risk. National Health Investors is currently generating about -0.05 per unit of risk. If you would invest  7,784  in Nasdaq Inc on May 6, 2025 and sell it today you would earn a total of  1,733  from holding Nasdaq Inc or generate 22.26% return on investment over 90 days.

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

Nasdaq Inc  vs.  National Health Investors

Nasdaq Inc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq reported solid returns over the last few months and may actually be approaching a breakup point.

National Health Investors

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Health Investors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, National Health is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Nasdaq and National Health

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

The idea behind Nasdaq Inc and National Health Investors 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.