Correlation Between Tree Island and NorthWest Healthcare

Can any of the company-specific risk be diversified away by investing in both Tree Island and NorthWest Healthcare 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 Tree Island and NorthWest Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tree Island Steel and NorthWest Healthcare Properties, you can compare the effects of market volatilities on Tree Island and NorthWest Healthcare 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 Tree Island with a short position of NorthWest Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tree Island and NorthWest Healthcare.

Diversification Opportunities for Tree Island and NorthWest Healthcare

-0.52

Correlation Coefficient

Tree Island  NorthWest Healthcare

Excellent diversification

The 3 months correlation between Tree and NorthWest is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Tree Island Steel and NorthWest Healthcare Propertie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorthWest Healthcare and Tree Island 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 Tree Island Steel are associated (or correlated) with NorthWest Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorthWest Healthcare has no effect on the direction of Tree Island i.e., Tree Island and NorthWest Healthcare go up and down completely randomly.

Pair Corralation between Tree Island and NorthWest Healthcare

Assuming the 90 days trading horizon Tree Island Steel is expected to under-perform the NorthWest Healthcare. In addition to that, Tree Island is 2.07 times more volatile than NorthWest Healthcare Properties. It trades about -0.15 of its total potential returns per unit of risk. NorthWest Healthcare Properties is currently generating about 0.08 per unit of volatility. If you would invest  449.00  in NorthWest Healthcare Properties on October 26, 2024 and sell it today you would earn a total of  8.00  from holding NorthWest Healthcare Properties or generate 1.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Tree Island Steel  vs.  NorthWest Healthcare Propertie

Tree Island Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tree Island Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Tree Island is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with Tree Island and NorthWest Healthcare

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

The idea behind Tree Island Steel and NorthWest Healthcare Properties 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.