Correlation Between LTC Properties and Healthcare Realty

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

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

Diversification Opportunities for LTC Properties and Healthcare Realty

0.18

Correlation Coefficient

LTC Properties  Healthcare Realty

Average diversification

The 3 months correlation between LTC and Healthcare is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding LTC Properties and Healthcare Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare Realty Trust and LTC Properties 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 LTC Properties are associated (or correlated) with Healthcare Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare Realty Trust has no effect on the direction of LTC Properties i.e., LTC Properties and Healthcare Realty go up and down completely randomly.

Pair Corralation between LTC Properties and Healthcare Realty

Considering the 90-day investment horizon LTC Properties is expected to under-perform the Healthcare Realty. But the stock apears to be less risky and, when comparing its historical volatility, LTC Properties is 1.57 times less risky than Healthcare Realty. The stock trades about -0.04 of its potential returns per unit of risk. The Healthcare Realty Trust is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,490  in Healthcare Realty Trust on May 7, 2025 and sell it today you would earn a total of  207.00  from holding Healthcare Realty Trust or generate 13.89% return on investment over 90 days.

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

LTC Properties  vs.  Healthcare Realty Trust

LTC Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days LTC Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, LTC Properties is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Healthcare Realty Trust

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Realty Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Healthcare Realty reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LTC Properties and Healthcare Realty

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

The idea behind LTC Properties and Healthcare Realty Trust 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.