Correlation Between Extendicare and HealWELL

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

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

Diversification Opportunities for Extendicare and HealWELL

0.36

Correlation Coefficient

Extendicare  HealWELL

Weak diversification

The 3 months correlation between Extendicare and HealWELL is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Extendicare and HealWELL AI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HealWELL AI and Extendicare 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 Extendicare are associated (or correlated) with HealWELL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HealWELL AI has no effect on the direction of Extendicare i.e., Extendicare and HealWELL go up and down completely randomly.

Pair Corralation between Extendicare and HealWELL

Assuming the 90 days trading horizon Extendicare is expected to generate 14.06 times less return on investment than HealWELL. But when comparing it to its historical volatility, Extendicare is 3.9 times less risky than HealWELL. It trades about 0.07 of its potential returns per unit of risk. HealWELL AI is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  88.00  in HealWELL AI on February 22, 2024 and sell it today you would earn a total of  77.00  from holding HealWELL AI or generate 87.5% return on investment over 90 days.

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

Extendicare  vs.  HealWELL AI

Extendicare

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Extendicare are ranked lower than 11 (%) 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.

HealWELL AI

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HealWELL AI are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, HealWELL displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Extendicare and HealWELL

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

The idea behind Extendicare and HealWELL AI 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.