Correlation Between Medicure and North West

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

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

Diversification Opportunities for Medicure and North West

-0.17

Correlation Coefficient

Medicure  North West

Good diversification

The 3 months correlation between Medicure and North is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Medicure and North West in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North West and Medicure 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 Medicure are associated (or correlated) with North West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North West has no effect on the direction of Medicure i.e., Medicure and North West go up and down completely randomly.

Pair Corralation between Medicure and North West

Assuming the 90 days horizon Medicure is expected to under-perform the North West. In addition to that, Medicure is 3.12 times more volatile than North West. It trades about -0.03 of its total potential returns per unit of risk. North West is currently generating about -0.02 per unit of volatility. If you would invest  5,017  in North West on September 21, 2024 and sell it today you would lose (99.00) from holding North West or give up 1.97% of portfolio value over 90 days.

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

Medicure  vs.  North West

Medicure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medicure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

North West

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North West has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, North West is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Medicure and North West

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

The idea behind Medicure and North West 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.

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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.