Correlation Between Canadian Apartment and Chartwell Retirement

Can any of the company-specific risk be diversified away by investing in both Canadian Apartment and Chartwell Retirement 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 Chartwell Retirement 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 Chartwell Retirement Residences, you can compare the effects of market volatilities on Canadian Apartment and Chartwell Retirement 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 Chartwell Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Apartment and Chartwell Retirement.

Diversification Opportunities for Canadian Apartment and Chartwell Retirement

-0.46

Correlation Coefficient

Canadian Apartment  Chartwell Retirement

Very good diversification

The 3 months correlation between Canadian and Chartwell is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Apartment Properties and Chartwell Retirement Residence in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chartwell Retirement 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 Chartwell Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chartwell Retirement has no effect on the direction of Canadian Apartment i.e., Canadian Apartment and Chartwell Retirement go up and down completely randomly.

Pair Corralation between Canadian Apartment and Chartwell Retirement

Assuming the 90 days trading horizon Canadian Apartment Properties is expected to under-perform the Chartwell Retirement. In addition to that, Canadian Apartment is 1.11 times more volatile than Chartwell Retirement Residences. It trades about -0.17 of its total potential returns per unit of risk. Chartwell Retirement Residences is currently generating about 0.17 per unit of volatility. If you would invest  1,448  in Chartwell Retirement Residences on August 31, 2024 and sell it today you would earn a total of  178.00  from holding Chartwell Retirement Residences or generate 12.29% return on investment over 90 days.

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

Canadian Apartment Properties  vs.  Chartwell Retirement Residence

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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Chartwell Retirement

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chartwell Retirement Residences are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical indicators, Chartwell Retirement may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Canadian Apartment and Chartwell Retirement

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

The idea behind Canadian Apartment Properties and Chartwell Retirement Residences 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.