Correlation Between Apple and Healthcare Realty

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

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

Diversification Opportunities for Apple and Healthcare Realty

0.87

Correlation Coefficient

Apple  Healthcare Realty

Very poor diversification

The 3 months correlation between Apple and Healthcare is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc 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 Apple 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 Apple Inc 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 Apple i.e., Apple and Healthcare Realty go up and down completely randomly.

Pair Corralation between Apple and Healthcare Realty

Assuming the 90 days trading horizon Apple is expected to generate 1.78 times less return on investment than Healthcare Realty. But when comparing it to its historical volatility, Apple Inc is 1.3 times less risky than Healthcare Realty. It trades about 0.03 of its potential returns per unit of risk. Healthcare Realty Trust is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,341  in Healthcare Realty Trust on October 24, 2024 and sell it today you would earn a total of  71.00  from holding Healthcare Realty Trust or generate 3.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	89.66%
Values	Daily Returns

Apple Inc  vs.  Healthcare Realty Trust

Apple Inc

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Apple is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Healthcare Realty Trust

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Healthcare Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Healthcare Realty is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Apple and Healthcare Realty

The main advantage of trading using opposite Apple and Healthcare Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.