Correlation Between NorthWest Healthcare and Canadian Utilities

Can any of the company-specific risk be diversified away by investing in both NorthWest Healthcare and Canadian Utilities 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 Canadian Utilities 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 Canadian Utilities Ltd, you can compare the effects of market volatilities on NorthWest Healthcare and Canadian Utilities 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 Canadian Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorthWest Healthcare and Canadian Utilities.

Diversification Opportunities for NorthWest Healthcare and Canadian Utilities

-0.52

Correlation Coefficient

NorthWest Healthcare  Canadian Utilities

Excellent diversification

The 3 months correlation between NorthWest and Canadian is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding NorthWest Healthcare Propertie and Canadian Utilities Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities 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 Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of NorthWest Healthcare i.e., NorthWest Healthcare and Canadian Utilities go up and down completely randomly.

Pair Corralation between NorthWest Healthcare and Canadian Utilities

Assuming the 90 days trading horizon NorthWest Healthcare Properties is expected to under-perform the Canadian Utilities. In addition to that, NorthWest Healthcare is 2.13 times more volatile than Canadian Utilities Ltd. It trades about -0.14 of its total potential returns per unit of risk. Canadian Utilities Ltd is currently generating about 0.06 per unit of volatility. If you would invest  2,450  in Canadian Utilities Ltd on October 10, 2024 and sell it today you would earn a total of  52.00  from holding Canadian Utilities Ltd or generate 2.12% return on investment over 90 days.

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

NorthWest Healthcare Propertie  vs.  Canadian Utilities Ltd

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 latest weak performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Canadian Utilities

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Utilities Ltd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Canadian Utilities is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NorthWest Healthcare and Canadian Utilities

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

The idea behind NorthWest Healthcare Properties and Canadian Utilities Ltd 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.