Correlation Between Sienna Senior and NorthWest Healthcare
Can any of the company-specific risk be diversified away by investing in both Sienna Senior 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 Sienna Senior and NorthWest Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sienna Senior Living and NorthWest Healthcare Properties, you can compare the effects of market volatilities on Sienna Senior 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 Sienna Senior with a short position of NorthWest Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sienna Senior and NorthWest Healthcare.
Diversification Opportunities for Sienna Senior and NorthWest Healthcare
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sienna and NorthWest is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sienna Senior Living and NorthWest Healthcare Propertie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorthWest Healthcare and Sienna Senior 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 Sienna Senior Living 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 Sienna Senior i.e., Sienna Senior and NorthWest Healthcare go up and down completely randomly.
Pair Corralation between Sienna Senior and NorthWest Healthcare
Assuming the 90 days trading horizon Sienna Senior Living is expected to generate 0.61 times more return on investment than NorthWest Healthcare. However, Sienna Senior Living is 1.65 times less risky than NorthWest Healthcare. It trades about 0.07 of its potential returns per unit of risk. NorthWest Healthcare Properties is currently generating about -0.05 per unit of risk. If you would invest 1,097 in Sienna Senior Living on November 2, 2024 and sell it today you would earn a total of 487.00 from holding Sienna Senior Living or generate 44.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sienna Senior Living vs. NorthWest Healthcare Propertie
Performance |
| Timeline |
| Sienna Senior Living |
| NorthWest Healthcare |
Sienna Senior and NorthWest Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sienna Senior and NorthWest Healthcare
The main advantage of trading using opposite Sienna Senior and NorthWest Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sienna Senior 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.| Sienna Senior vs. Extendicare | Sienna Senior vs. Chartwell Retirement Residences | Sienna Senior vs. NorthWest Healthcare Properties | Sienna Senior vs. Dream Industrial Real |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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