Correlation Between Freehold Royalties and NorthWest Healthcare

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

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

Diversification Opportunities for Freehold Royalties and NorthWest Healthcare

0.23

Correlation Coefficient

Freehold Royalties  NorthWest Healthcare

Modest diversification

The 3 months correlation between Freehold and NorthWest is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Freehold Royalties and NorthWest Healthcare Propertie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorthWest Healthcare and Freehold Royalties 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 Freehold Royalties 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 Freehold Royalties i.e., Freehold Royalties and NorthWest Healthcare go up and down completely randomly.

Pair Corralation between Freehold Royalties and NorthWest Healthcare

Assuming the 90 days trading horizon Freehold Royalties is expected to generate 0.8 times more return on investment than NorthWest Healthcare. However, Freehold Royalties is 1.25 times less risky than NorthWest Healthcare. It trades about 0.11 of its potential returns per unit of risk. NorthWest Healthcare Properties is currently generating about -0.01 per unit of risk. If you would invest  1,284  in Freehold Royalties on September 5, 2024 and sell it today you would earn a total of  94.00  from holding Freehold Royalties or generate 7.32% return on investment over 90 days.

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

Freehold Royalties  vs.  NorthWest Healthcare Propertie

Freehold Royalties

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Freehold Royalties are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Freehold Royalties may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 somewhat strong technical indicators, NorthWest Healthcare is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Freehold Royalties and NorthWest Healthcare

The main advantage of trading using opposite Freehold Royalties and NorthWest Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freehold Royalties 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 Freehold Royalties 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.