Correlation Between Chemed Corp and National HealthCare

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

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

Diversification Opportunities for Chemed Corp and National HealthCare

-0.64

Correlation Coefficient

Chemed Corp  National HealthCare

Excellent diversification

The 3 months correlation between Chemed and National is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Chemed Corp and National HealthCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National HealthCare and Chemed Corp 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 Chemed Corp are associated (or correlated) with National HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National HealthCare has no effect on the direction of Chemed Corp i.e., Chemed Corp and National HealthCare go up and down completely randomly.

Pair Corralation between Chemed Corp and National HealthCare

Considering the 90-day investment horizon Chemed Corp is expected to under-perform the National HealthCare. But the stock apears to be less risky and, when comparing its historical volatility, Chemed Corp is 1.04 times less risky than National HealthCare. The stock trades about -0.09 of its potential returns per unit of risk. The National HealthCare is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  9,086  in National HealthCare on March 24, 2025 and sell it today you would earn a total of  1,400  from holding National HealthCare or generate 15.41% return on investment over 90 days.

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

Chemed Corp  vs.  National HealthCare

Chemed Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chemed Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

National HealthCare

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National HealthCare are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical indicators, National HealthCare exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chemed Corp and National HealthCare

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

The idea behind Chemed Corp and National HealthCare 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..