Correlation Between Extendicare and NorthWest Healthcare
Can any of the company-specific risk be diversified away by investing in both Extendicare and NorthWest 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 Extendicare and NorthWest Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extendicare and NorthWest Healthcare Properties, you can compare the effects of market volatilities on Extendicare and NorthWest 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 Extendicare with a short position of NorthWest Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extendicare and NorthWest Healthcare.
Diversification Opportunities for Extendicare and NorthWest Healthcare
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Extendicare and NorthWest is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Extendicare and NorthWest Healthcare Propertie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorthWest Healthcare and Extendicare 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 Extendicare are associated (or correlated) with NorthWest Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorthWest Healthcare has no effect on the direction of Extendicare i.e., Extendicare and NorthWest Healthcare go up and down completely randomly.
Pair Corralation between Extendicare and NorthWest Healthcare
Assuming the 90 days trading horizon Extendicare is expected to generate 1.96 times more return on investment than NorthWest Healthcare. However, Extendicare is 1.96 times more volatile than NorthWest Healthcare Properties. It trades about 0.25 of its potential returns per unit of risk. NorthWest Healthcare Properties is currently generating about -0.42 per unit of risk. If you would invest 930.00 in Extendicare on August 29, 2024 and sell it today you would earn a total of 103.00 from holding Extendicare or generate 11.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extendicare vs. NorthWest Healthcare Propertie
Performance |
| Timeline |
| Extendicare |
| NorthWest Healthcare |
Extendicare and NorthWest Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extendicare and NorthWest Healthcare
The main advantage of trading using opposite Extendicare and NorthWest Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extendicare position performs unexpectedly, NorthWest 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 NorthWest Healthcare will offset losses from the drop in NorthWest Healthcare's long position.| Extendicare vs. Solar Alliance Energy | Extendicare vs. Braille Energy Systems | Extendicare vs. MedMira | Extendicare vs. Lite Access Technologies |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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