Correlation Between Peace Living and NC Housing

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

By analyzing existing cross correlation between Peace Living PCL and NC Housing Public, you can compare the effects of market volatilities on Peace Living and NC Housing 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 Peace Living with a short position of NC Housing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Peace Living and NC Housing.

Diversification Opportunities for Peace Living and NC Housing

0.92

Correlation Coefficient

Peace Living  NC Housing

Almost no diversification

The 3 months correlation between Peace and NCH is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Peace Living PCL and NC Housing Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NC Housing Public and Peace Living 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 Peace Living PCL are associated (or correlated) with NC Housing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NC Housing Public has no effect on the direction of Peace Living i.e., Peace Living and NC Housing go up and down completely randomly.

Pair Corralation between Peace Living and NC Housing

Assuming the 90 days trading horizon Peace Living PCL is expected to under-perform the NC Housing. But the stock apears to be less risky and, when comparing its historical volatility, Peace Living PCL is 1.28 times less risky than NC Housing. The stock trades about -0.19 of its potential returns per unit of risk. The NC Housing Public is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  78.00  in NC Housing Public on September 28, 2024 and sell it today you would lose (6.00) from holding NC Housing Public or give up 7.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Peace Living PCL  vs.  NC Housing Public

Peace Living PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Peace Living PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers 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.

NC Housing Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NC Housing Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Peace Living and NC Housing

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

The idea behind Peace Living PCL and NC Housing Public 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.