Correlation Between Chartwell Retirement and Extendicare

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

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

Diversification Opportunities for Chartwell Retirement and Extendicare

0.78

Correlation Coefficient

Chartwell Retirement  Extendicare

Poor diversification

The 3 months correlation between Chartwell and Extendicare is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Chartwell Retirement Residence and Extendicare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extendicare and Chartwell Retirement 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 Chartwell Retirement Residences are associated (or correlated) with Extendicare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extendicare has no effect on the direction of Chartwell Retirement i.e., Chartwell Retirement and Extendicare go up and down completely randomly.

Pair Corralation between Chartwell Retirement and Extendicare

Assuming the 90 days trading horizon Chartwell Retirement is expected to generate 1.6 times less return on investment than Extendicare. But when comparing it to its historical volatility, Chartwell Retirement Residences is 1.38 times less risky than Extendicare. It trades about 0.17 of its potential returns per unit of risk. Extendicare is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  883.00  in Extendicare on August 31, 2024 and sell it today you would earn a total of  179.00  from holding Extendicare or generate 20.27% return on investment over 90 days.

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

Chartwell Retirement Residence  vs.  Extendicare

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.

Extendicare

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Extendicare are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Extendicare displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chartwell Retirement and Extendicare

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

The idea behind Chartwell Retirement Residences and Extendicare 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.