Correlation Between NorthWest Healthcare and Saville Resources

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

Diversification Opportunities for NorthWest Healthcare and Saville Resources

-0.65

Correlation Coefficient

NorthWest Healthcare  Saville Resources

Excellent diversification

The 3 months correlation between NorthWest and Saville is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding NorthWest Healthcare Propertie and Saville Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saville Resources 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 Saville Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saville Resources has no effect on the direction of NorthWest Healthcare i.e., NorthWest Healthcare and Saville Resources go up and down completely randomly.

Pair Corralation between NorthWest Healthcare and Saville Resources

Assuming the 90 days trading horizon NorthWest Healthcare Properties is expected to under-perform the Saville Resources. But the stock apears to be less risky and, when comparing its historical volatility, NorthWest Healthcare Properties is 6.0 times less risky than Saville Resources. The stock trades about -0.2 of its potential returns per unit of risk. The Saville Resources is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Saville Resources on October 26, 2024 and sell it today you would earn a total of  18.00  from holding Saville Resources or generate 64.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	80.33%
Values	Daily Returns

NorthWest Healthcare Propertie  vs.  Saville Resources

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.

Saville Resources

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Saville Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal basic indicators, Saville Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NorthWest Healthcare and Saville Resources

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

The idea behind NorthWest Healthcare Properties and Saville Resources 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.