Correlation Between Canadian Utilities and NorthWest Healthcare

Can any of the company-specific risk be diversified away by investing in both Canadian Utilities 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 Utilities 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 Utilities Ltd and NorthWest Healthcare Properties, you can compare the effects of market volatilities on Canadian Utilities 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 Utilities with a short position of NorthWest Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and NorthWest Healthcare.

Diversification Opportunities for Canadian Utilities and NorthWest Healthcare

-0.07

Correlation Coefficient

Canadian Utilities  NorthWest Healthcare

Good diversification

The 3 months correlation between Canadian and NorthWest is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Ltd 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 Utilities 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 Utilities Ltd 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 Utilities i.e., Canadian Utilities and NorthWest Healthcare go up and down completely randomly.

Pair Corralation between Canadian Utilities and NorthWest Healthcare

Assuming the 90 days trading horizon Canadian Utilities Ltd is expected to under-perform the NorthWest Healthcare. But the preferred stock apears to be less risky and, when comparing its historical volatility, Canadian Utilities Ltd is 4.83 times less risky than NorthWest Healthcare. The preferred stock trades about 0.0 of its potential returns per unit of risk. The NorthWest Healthcare Properties is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  443.00  in NorthWest Healthcare Properties on December 26, 2024 and sell it today you would earn a total of  61.00  from holding NorthWest Healthcare Properties or generate 13.77% return on investment over 90 days.

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

Canadian Utilities Ltd  vs.  NorthWest Healthcare Propertie

Canadian Utilities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canadian Utilities Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Canadian Utilities is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

NorthWest Healthcare

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NorthWest Healthcare Properties are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, NorthWest Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Utilities and NorthWest Healthcare

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

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.