Correlation Between Northview Residential and Laurentian Bank

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

By analyzing existing cross correlation between Northview Residential REIT and Laurentian Bank, you can compare the effects of market volatilities on Northview Residential and Laurentian Bank 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 Northview Residential with a short position of Laurentian Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northview Residential and Laurentian Bank.

Diversification Opportunities for Northview Residential and Laurentian Bank

0.64

Correlation Coefficient

Northview Residential  Laurentian Bank

Poor diversification

The 3 months correlation between Northview and Laurentian is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Northview Residential REIT and Laurentian Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laurentian Bank and Northview Residential 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 Northview Residential REIT are associated (or correlated) with Laurentian Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laurentian Bank has no effect on the direction of Northview Residential i.e., Northview Residential and Laurentian Bank go up and down completely randomly.

Pair Corralation between Northview Residential and Laurentian Bank

Assuming the 90 days trading horizon Northview Residential REIT is expected to generate 1.05 times more return on investment than Laurentian Bank. However, Northview Residential is 1.05 times more volatile than Laurentian Bank. It trades about -0.12 of its potential returns per unit of risk. Laurentian Bank is currently generating about -0.19 per unit of risk. If you would invest  1,602  in Northview Residential REIT on December 11, 2024 and sell it today you would lose (127.00) from holding Northview Residential REIT or give up 7.93% of portfolio value over 90 days.

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

Northview Residential REIT  vs.  Laurentian Bank

Northview Residential

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northview Residential REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal 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.

Laurentian Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Laurentian Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Northview Residential and Laurentian Bank

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

The idea behind Northview Residential REIT and Laurentian Bank 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.