Correlation Between Community Healthcare and Healthpeak Properties

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

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

Diversification Opportunities for Community Healthcare and Healthpeak Properties

-0.23

Correlation Coefficient

Community Healthcare  Healthpeak Properties

Very good diversification

The 3 months correlation between Community and Healthpeak is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Community Healthcare Trust and Healthpeak Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthpeak Properties and Community Healthcare 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 Community Healthcare Trust are associated (or correlated) with Healthpeak Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthpeak Properties has no effect on the direction of Community Healthcare i.e., Community Healthcare and Healthpeak Properties go up and down completely randomly.

Pair Corralation between Community Healthcare and Healthpeak Properties

Given the investment horizon of 90 days Community Healthcare Trust is expected to under-perform the Healthpeak Properties. In addition to that, Community Healthcare is 1.2 times more volatile than Healthpeak Properties. It trades about -0.05 of its total potential returns per unit of risk. Healthpeak Properties is currently generating about -0.01 per unit of volatility. If you would invest  2,335  in Healthpeak Properties on September 30, 2024 and sell it today you would lose (327.00) from holding Healthpeak Properties or give up 14.0% of portfolio value over 90 days.

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

Community Healthcare Trust  vs.  Healthpeak Properties

Community Healthcare

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Community Healthcare Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Community Healthcare is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Healthpeak Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Healthpeak Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Community Healthcare and Healthpeak Properties

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

The idea behind Community Healthcare Trust and Healthpeak 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.