Correlation Between Timbercreek Financial and Northview Residential

Can any of the company-specific risk be diversified away by investing in both Timbercreek Financial and Northview Residential 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 Timbercreek Financial and Northview Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Timbercreek Financial Corp and Northview Residential REIT, you can compare the effects of market volatilities on Timbercreek Financial and Northview Residential 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 Timbercreek Financial with a short position of Northview Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timbercreek Financial and Northview Residential.

Diversification Opportunities for Timbercreek Financial and Northview Residential

0.76

Correlation Coefficient

Timbercreek Financial  Northview Residential

Poor diversification

The 3 months correlation between Timbercreek and Northview is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Timbercreek Financial Corp and Northview Residential REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northview Residential and Timbercreek Financial 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 Timbercreek Financial Corp are associated (or correlated) with Northview Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northview Residential has no effect on the direction of Timbercreek Financial i.e., Timbercreek Financial and Northview Residential go up and down completely randomly.

Pair Corralation between Timbercreek Financial and Northview Residential

Assuming the 90 days horizon Timbercreek Financial Corp is expected to generate 0.87 times more return on investment than Northview Residential. However, Timbercreek Financial Corp is 1.15 times less risky than Northview Residential. It trades about 0.02 of its potential returns per unit of risk. Northview Residential REIT is currently generating about -0.07 per unit of risk. If you would invest  708.00  in Timbercreek Financial Corp on October 25, 2024 and sell it today you would earn a total of  2.00  from holding Timbercreek Financial Corp or generate 0.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Timbercreek Financial Corp  vs.  Northview Residential REIT

Timbercreek Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timbercreek Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Northview Residential

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northview Residential REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic 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.

Pair Trading with Timbercreek Financial and Northview Residential

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

The idea behind Timbercreek Financial Corp and Northview Residential REIT 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.