Correlation Between Postmedia Network and NeuPath Health

Can any of the company-specific risk be diversified away by investing in both Postmedia Network and NeuPath Health 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 Postmedia Network and NeuPath Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Postmedia Network Canada and NeuPath Health, you can compare the effects of market volatilities on Postmedia Network and NeuPath Health 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 Postmedia Network with a short position of NeuPath Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Postmedia Network and NeuPath Health.

Diversification Opportunities for Postmedia Network and NeuPath Health

-0.51

Correlation Coefficient

Postmedia Network  NeuPath Health

Excellent diversification

The 3 months correlation between Postmedia and NeuPath is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Postmedia Network Canada and NeuPath Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NeuPath Health and Postmedia Network 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 Postmedia Network Canada are associated (or correlated) with NeuPath Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NeuPath Health has no effect on the direction of Postmedia Network i.e., Postmedia Network and NeuPath Health go up and down completely randomly.

Pair Corralation between Postmedia Network and NeuPath Health

Assuming the 90 days trading horizon Postmedia Network is expected to generate 16.72 times less return on investment than NeuPath Health. But when comparing it to its historical volatility, Postmedia Network Canada is 1.18 times less risky than NeuPath Health. It trades about 0.01 of its potential returns per unit of risk. NeuPath Health is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  17.00  in NeuPath Health on October 22, 2024 and sell it today you would earn a total of  4.00  from holding NeuPath Health or generate 23.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Postmedia Network Canada  vs.  NeuPath Health

Postmedia Network Canada

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Postmedia Network Canada has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Postmedia Network is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

NeuPath Health

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Postmedia Network and NeuPath Health

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

The idea behind Postmedia Network Canada and NeuPath Health 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.