Correlation Between Dream Industrial and Extendicare

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

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

Diversification Opportunities for Dream Industrial and Extendicare

-0.6

Correlation Coefficient

Dream Industrial  Extendicare

Excellent diversification

The 3 months correlation between Dream and Extendicare is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dream Industrial Real and Extendicare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extendicare and Dream Industrial 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 Industrial Real 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 Dream Industrial i.e., Dream Industrial and Extendicare go up and down completely randomly.

Pair Corralation between Dream Industrial and Extendicare

Assuming the 90 days trading horizon Dream Industrial Real is expected to under-perform the Extendicare. But the stock apears to be less risky and, when comparing its historical volatility, Dream Industrial Real is 1.34 times less risky than Extendicare. The stock trades about -0.11 of its potential returns per unit of risk. The 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 Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Dream Industrial Real  vs.  Extendicare

Dream Industrial Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dream Industrial Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 Dream Industrial and Extendicare

The main advantage of trading using opposite Dream Industrial and Extendicare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dream Industrial 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 Dream Industrial Real 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.