Correlation Between NorthWest Healthcare and Fairfax Financial

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

Diversification Opportunities for NorthWest Healthcare and Fairfax Financial

-0.94
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between NorthWest and Fairfax is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding NorthWest Healthcare Propertie and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial 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 Fairfax Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairfax Financial has no effect on the direction of NorthWest Healthcare i.e., NorthWest Healthcare and Fairfax Financial go up and down completely randomly.

Pair Corralation between NorthWest Healthcare and Fairfax Financial

Assuming the 90 days trading horizon NorthWest Healthcare Properties is expected to under-perform the Fairfax Financial. In addition to that, NorthWest Healthcare is 2.35 times more volatile than Fairfax Financial Holdings. It trades about -0.05 of its total potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.1 per unit of volatility. If you would invest  1,676  in Fairfax Financial Holdings on October 23, 2024 and sell it today you would earn a total of  821.00  from holding Fairfax Financial Holdings or generate 48.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy97.57%
ValuesDaily Returns

NorthWest Healthcare Propertie  vs.  Fairfax Financial Holdings

 Performance 
       Timeline  
NorthWest Healthcare 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 weak performance in the last few months, the Stock's technical indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Fairfax Financial 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Solid
Over the last 90 days Fairfax Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat abnormal technical indicators, Fairfax Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

NorthWest Healthcare and Fairfax Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NorthWest Healthcare and Fairfax Financial

The main advantage of trading using opposite NorthWest Healthcare and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorthWest Healthcare position performs unexpectedly, Fairfax Financial 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 Fairfax Financial will offset losses from the drop in Fairfax Financial's long position.
The idea behind NorthWest Healthcare Properties and Fairfax Financial Holdings 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 CEOs Directory module to screen CEOs from public companies around the world.

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