Correlation Between Canadian Apartment and NorthWest Healthcare

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

By analyzing existing cross correlation between Canadian Apartment Properties and NorthWest Healthcare Properties, you can compare the effects of market volatilities on Canadian Apartment 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 Canadian Apartment with a short position of NorthWest Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Apartment and NorthWest Healthcare.

Diversification Opportunities for Canadian Apartment and NorthWest Healthcare

0.85

Correlation Coefficient

Canadian Apartment  NorthWest Healthcare

Very poor diversification

The 3 months correlation between Canadian and NorthWest is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Apartment Properties and NorthWest Healthcare Propertie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorthWest Healthcare and Canadian Apartment 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 Canadian Apartment Properties 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 Canadian Apartment i.e., Canadian Apartment and NorthWest Healthcare go up and down completely randomly.

Pair Corralation between Canadian Apartment and NorthWest Healthcare

Assuming the 90 days trading horizon Canadian Apartment Properties is expected to under-perform the NorthWest Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Apartment Properties is 1.14 times less risky than NorthWest Healthcare. The stock trades about -0.34 of its potential returns per unit of risk. The NorthWest Healthcare Properties is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  541.00  in NorthWest Healthcare Properties on September 13, 2024 and sell it today you would lose (66.00) from holding NorthWest Healthcare Properties or give up 12.2% of portfolio value over 90 days.

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

Canadian Apartment Properties  vs.  NorthWest Healthcare Propertie

Canadian Apartment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Apartment Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

NorthWest Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NorthWest Healthcare Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Canadian Apartment and NorthWest Healthcare

The main advantage of trading using opposite Canadian Apartment and NorthWest Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Apartment 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.

The idea behind Canadian Apartment Properties and NorthWest Healthcare Properties 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.