Correlation Between Acadia Healthcare and Northwest Bancshares
Can any of the company-specific risk be diversified away by investing in both Acadia Healthcare and Northwest Bancshares 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 Acadia Healthcare and Northwest Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Acadia Healthcare and Northwest Bancshares, you can compare the effects of market volatilities on Acadia Healthcare and Northwest Bancshares 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 Acadia Healthcare with a short position of Northwest Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acadia Healthcare and Northwest Bancshares.
Diversification Opportunities for Acadia Healthcare and Northwest Bancshares
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Acadia and Northwest is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Healthcare and Northwest Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northwest Bancshares and Acadia Healthcare 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 Acadia Healthcare are associated (or correlated) with Northwest Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northwest Bancshares has no effect on the direction of Acadia Healthcare i.e., Acadia Healthcare and Northwest Bancshares go up and down completely randomly.
Pair Corralation between Acadia Healthcare and Northwest Bancshares
Assuming the 90 days horizon Acadia Healthcare is expected to under-perform the Northwest Bancshares. In addition to that, Acadia Healthcare is 1.24 times more volatile than Northwest Bancshares. It trades about -0.05 of its total potential returns per unit of risk. Northwest Bancshares is currently generating about 0.02 per unit of volatility. If you would invest 1,004 in Northwest Bancshares on December 7, 2024 and sell it today you would earn a total of 126.00 from holding Northwest Bancshares or generate 12.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Acadia Healthcare vs. Northwest Bancshares
Performance |
| Timeline |
| Acadia Healthcare |
| Northwest Bancshares |
Acadia Healthcare and Northwest Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Acadia Healthcare and Northwest Bancshares
The main advantage of trading using opposite Acadia Healthcare and Northwest Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Acadia Healthcare position performs unexpectedly, Northwest Bancshares 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 Northwest Bancshares will offset losses from the drop in Northwest Bancshares' long position.| Acadia Healthcare vs. Urban Outfitters | ||
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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 CEOs Directory module to screen CEOs from public companies around the world.
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