Correlation Between Exchange Income and Extendicare

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

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

Diversification Opportunities for Exchange Income and Extendicare

-0.07

Correlation Coefficient

Exchange Income  Extendicare

Good diversification

The 3 months correlation between Exchange and Extendicare is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Exchange Income and Extendicare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extendicare and Exchange Income 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 Exchange Income 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 Exchange Income i.e., Exchange Income and Extendicare go up and down completely randomly.

Pair Corralation between Exchange Income and Extendicare

Assuming the 90 days trading horizon Exchange Income is expected to generate 0.63 times more return on investment than Extendicare. However, Exchange Income is 1.6 times less risky than Extendicare. It trades about 0.47 of its potential returns per unit of risk. Extendicare is currently generating about 0.01 per unit of risk. If you would invest  4,879  in Exchange Income on April 22, 2025 and sell it today you would earn a total of  1,678  from holding Exchange Income or generate 34.39% return on investment over 90 days.

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

Exchange Income  vs.  Extendicare

Exchange Income

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Income are ranked lower than 36 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Exchange Income displayed solid returns over the last few months and may actually be approaching a breakup point.

Extendicare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Extendicare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Extendicare is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Exchange Income and Extendicare

The main advantage of trading using opposite Exchange Income and Extendicare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exchange Income 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 Exchange Income 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.