Correlation Between NorthWest Healthcare and American Lithium

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

Diversification Opportunities for NorthWest Healthcare and American Lithium

0.46

Correlation Coefficient

NorthWest Healthcare  American Lithium

Very weak diversification

The 3 months correlation between NorthWest and American is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding NorthWest Healthcare Propertie and American Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Lithium 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 American Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Lithium Corp has no effect on the direction of NorthWest Healthcare i.e., NorthWest Healthcare and American Lithium go up and down completely randomly.

Pair Corralation between NorthWest Healthcare and American Lithium

Assuming the 90 days trading horizon NorthWest Healthcare Properties is expected to generate 0.41 times more return on investment than American Lithium. However, NorthWest Healthcare Properties is 2.44 times less risky than American Lithium. It trades about -0.05 of its potential returns per unit of risk. American Lithium Corp is currently generating about -0.06 per unit of risk. If you would invest  841.00  in NorthWest Healthcare Properties on October 4, 2024 and sell it today you would lose (396.00) from holding NorthWest Healthcare Properties or give up 47.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

NorthWest Healthcare Propertie  vs.  American Lithium Corp

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 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.

American Lithium Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Lithium Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, American Lithium is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with NorthWest Healthcare and American Lithium

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

The idea behind NorthWest Healthcare Properties and American Lithium 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.