Correlation Between Safe and CareTrust REIT

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

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

Diversification Opportunities for Safe and CareTrust REIT

0.4

Correlation Coefficient

Safe  CareTrust REIT

Very weak diversification

The 3 months correlation between Safe and CareTrust is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Safe and Green and CareTrust REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareTrust REIT and Safe 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 Safe and Green 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 Safe i.e., Safe and CareTrust REIT go up and down completely randomly.

Pair Corralation between Safe and CareTrust REIT

Considering the 90-day investment horizon Safe and Green is expected to under-perform the CareTrust REIT. In addition to that, Safe is 6.08 times more volatile than CareTrust REIT. It trades about -0.07 of its total potential returns per unit of risk. CareTrust REIT is currently generating about 0.06 per unit of volatility. If you would invest  2,490  in CareTrust REIT on September 29, 2024 and sell it today you would earn a total of  216.00  from holding CareTrust REIT or generate 8.67% return on investment over 90 days.

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

Safe and Green  vs.  CareTrust REIT

Safe and Green

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safe and Green has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

CareTrust REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CareTrust REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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 Safe and CareTrust REIT

The main advantage of trading using opposite Safe and CareTrust REIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safe 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 Safe and Green 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.