Correlation Between Canadian Utilities and HEALTHCARE REAL

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

By analyzing existing cross correlation between Canadian Utilities Limited and HEALTHCARE REAL A, you can compare the effects of market volatilities on Canadian Utilities and HEALTHCARE REAL 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 HEALTHCARE REAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and HEALTHCARE REAL.

Diversification Opportunities for Canadian Utilities and HEALTHCARE REAL

0.75

Correlation Coefficient

Canadian Utilities  HEALTHCARE REAL

Poor diversification

The 3 months correlation between Canadian and HEALTHCARE is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and HEALTHCARE REAL A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEALTHCARE REAL A 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 Limited are associated (or correlated) with HEALTHCARE REAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEALTHCARE REAL A has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and HEALTHCARE REAL go up and down completely randomly.

Pair Corralation between Canadian Utilities and HEALTHCARE REAL

Assuming the 90 days horizon Canadian Utilities Limited is expected to generate 0.53 times more return on investment than HEALTHCARE REAL. However, Canadian Utilities Limited is 1.87 times less risky than HEALTHCARE REAL. It trades about -0.07 of its potential returns per unit of risk. HEALTHCARE REAL A is currently generating about -0.09 per unit of risk. If you would invest  2,315  in Canadian Utilities Limited on October 25, 2024 and sell it today you would lose (23.00) from holding Canadian Utilities Limited or give up 0.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

Canadian Utilities Limited  vs.  HEALTHCARE REAL A

Canadian Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Utilities Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Canadian Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

HEALTHCARE REAL A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEALTHCARE REAL A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, HEALTHCARE REAL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Canadian Utilities and HEALTHCARE REAL

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

The idea behind Canadian Utilities Limited and HEALTHCARE REAL A 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.