Correlation Between Healthcare Realty and CareTrust REIT

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

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

Diversification Opportunities for Healthcare Realty and CareTrust REIT

-0.67

Correlation Coefficient

Healthcare Realty  CareTrust REIT

Excellent diversification

The 3 months correlation between Healthcare and CareTrust is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Realty Trust and CareTrust REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareTrust REIT and Healthcare Realty 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 Healthcare Realty Trust are associated (or correlated) with CareTrust REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareTrust REIT has no effect on the direction of Healthcare Realty i.e., Healthcare Realty and CareTrust REIT go up and down completely randomly.

Pair Corralation between Healthcare Realty and CareTrust REIT

Allowing for the 90-day total investment horizon Healthcare Realty is expected to generate 1.09 times less return on investment than CareTrust REIT. In addition to that, Healthcare Realty is 1.53 times more volatile than CareTrust REIT. It trades about 0.12 of its total potential returns per unit of risk. CareTrust REIT is currently generating about 0.2 per unit of volatility. If you would invest  2,405  in CareTrust REIT on February 2, 2024 and sell it today you would earn a total of  112.00  from holding CareTrust REIT or generate 4.66% return on investment over 90 days.

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

Healthcare Realty Trust  vs.  CareTrust REIT

Healthcare Realty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Healthcare Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

CareTrust REIT

Risk-Adjusted Performance

21 of 100

Solid

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

Pair Trading with Healthcare Realty and CareTrust REIT

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

The idea behind Healthcare Realty Trust and CareTrust 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.