Correlation Between Dream Office and NorthWest Healthcare

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

By analyzing existing cross correlation between Dream Office Real and NorthWest Healthcare Properties, you can compare the effects of market volatilities on Dream Office 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 Dream Office with a short position of NorthWest Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dream Office and NorthWest Healthcare.

Diversification Opportunities for Dream Office and NorthWest Healthcare

0.93

Correlation Coefficient

Dream Office  NorthWest Healthcare

Almost no diversification

The 3 months correlation between Dream and NorthWest is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Dream Office Real and NorthWest Healthcare Propertie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorthWest Healthcare and Dream Office 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 Dream Office Real 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 Dream Office i.e., Dream Office and NorthWest Healthcare go up and down completely randomly.

Pair Corralation between Dream Office and NorthWest Healthcare

Assuming the 90 days trading horizon Dream Office Real is expected to under-perform the NorthWest Healthcare. In addition to that, Dream Office is 1.27 times more volatile than NorthWest Healthcare Properties. It trades about -0.24 of its total potential returns per unit of risk. NorthWest Healthcare Properties is currently generating about -0.19 per unit of volatility. If you would invest  518.00  in NorthWest Healthcare Properties on October 21, 2024 and sell it today you would lose (71.00) from holding NorthWest Healthcare Properties or give up 13.71% of portfolio value over 90 days.

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

Dream Office Real  vs.  NorthWest Healthcare Propertie

Dream Office Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dream Office Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

NorthWest Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NorthWest Healthcare Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Dream Office and NorthWest Healthcare

The main advantage of trading using opposite Dream Office and NorthWest Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dream Office 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 Dream Office Real 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 Transaction History module to view history of all your transactions and understand their impact on performance.