Correlation Between WELL Health and Extendicare

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

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

Diversification Opportunities for WELL Health and Extendicare

0.9

Correlation Coefficient

WELL Health  Extendicare

Almost no diversification

The 3 months correlation between WELL and Extendicare is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding WELL Health Technologies and Extendicare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extendicare and WELL Health 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 WELL Health Technologies are associated (or correlated) with Extendicare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extendicare has no effect on the direction of WELL Health i.e., WELL Health and Extendicare go up and down completely randomly.

Pair Corralation between WELL Health and Extendicare

Assuming the 90 days trading horizon WELL Health Technologies is expected to generate 1.93 times more return on investment than Extendicare. However, WELL Health is 1.93 times more volatile than Extendicare. It trades about 0.27 of its potential returns per unit of risk. Extendicare is currently generating about 0.16 per unit of risk. If you would invest  429.00  in WELL Health Technologies on September 13, 2024 and sell it today you would earn a total of  240.00  from holding WELL Health Technologies or generate 55.94% return on investment over 90 days.

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

WELL Health Technologies  vs.  Extendicare

WELL Health Technologies

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WELL Health Technologies are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, WELL Health displayed solid returns over the last few months and may actually be approaching a breakup point.

Extendicare

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Extendicare are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Extendicare displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WELL Health and Extendicare

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

The idea behind WELL Health Technologies and Extendicare 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.