Correlation Between Extendicare and Chartwell Retirement

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

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

Diversification Opportunities for Extendicare and Chartwell Retirement

0.77

Correlation Coefficient

Extendicare  Chartwell Retirement

Poor diversification

The 3 months correlation between Extendicare and Chartwell is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Extendicare and Chartwell Retirement Residence in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chartwell Retirement and Extendicare 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 Extendicare are associated (or correlated) with Chartwell Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chartwell Retirement has no effect on the direction of Extendicare i.e., Extendicare and Chartwell Retirement go up and down completely randomly.

Pair Corralation between Extendicare and Chartwell Retirement

Assuming the 90 days trading horizon Extendicare is expected to generate 1.36 times more return on investment than Chartwell Retirement. However, Extendicare is 1.36 times more volatile than Chartwell Retirement Residences. It trades about 0.2 of its potential returns per unit of risk. Chartwell Retirement Residences is currently generating about 0.16 per unit of risk. If you would invest  880.00  in Extendicare on September 2, 2024 and sell it today you would earn a total of  182.00  from holding Extendicare or generate 20.68% return on investment over 90 days.

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

Extendicare  vs.  Chartwell Retirement Residence

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.

Chartwell Retirement

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chartwell Retirement Residences are ranked lower than 12 (%) 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 January 2025.

Pair Trading with Extendicare and Chartwell Retirement

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

The idea behind Extendicare and Chartwell Retirement Residences 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.