Correlation Between NorthWest Healthcare and Hercules Metals

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

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

Diversification Opportunities for NorthWest Healthcare and Hercules Metals

0.66

Correlation Coefficient

NorthWest Healthcare  Hercules Metals

Poor diversification

The 3 months correlation between NorthWest and Hercules is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding NorthWest Healthcare Propertie and Hercules Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Metals Corp and NorthWest Healthcare 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 NorthWest Healthcare Properties are associated (or correlated) with Hercules Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hercules Metals Corp has no effect on the direction of NorthWest Healthcare i.e., NorthWest Healthcare and Hercules Metals go up and down completely randomly.

Pair Corralation between NorthWest Healthcare and Hercules Metals

Assuming the 90 days trading horizon NorthWest Healthcare is expected to generate 2.21 times less return on investment than Hercules Metals. But when comparing it to its historical volatility, NorthWest Healthcare Properties is 2.83 times less risky than Hercules Metals. It trades about 0.14 of its potential returns per unit of risk. Hercules Metals Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  55.00  in Hercules Metals Corp on December 24, 2024 and sell it today you would earn a total of  15.00  from holding Hercules Metals Corp or generate 27.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

NorthWest Healthcare Propertie  vs.  Hercules Metals Corp

NorthWest Healthcare

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NorthWest Healthcare Properties are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, NorthWest Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

Hercules Metals Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hercules Metals Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Hercules Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NorthWest Healthcare and Hercules Metals

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

The idea behind NorthWest Healthcare Properties and Hercules Metals Corp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.