Correlation Between American Healthcare and Boston Properties

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

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

Diversification Opportunities for American Healthcare and Boston Properties

-0.33

Correlation Coefficient

American Healthcare  Boston Properties

Very good diversification

The 3 months correlation between American and Boston is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding American Healthcare REIT, and Boston Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Properties and American 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 American Healthcare REIT, are associated (or correlated) with Boston Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Properties has no effect on the direction of American Healthcare i.e., American Healthcare and Boston Properties go up and down completely randomly.

Pair Corralation between American Healthcare and Boston Properties

Considering the 90-day investment horizon American Healthcare REIT, is expected to generate 0.96 times more return on investment than Boston Properties. However, American Healthcare REIT, is 1.04 times less risky than Boston Properties. It trades about 0.07 of its potential returns per unit of risk. Boston Properties is currently generating about -0.07 per unit of risk. If you would invest  2,838  in American Healthcare REIT, on December 26, 2024 and sell it today you would earn a total of  193.00  from holding American Healthcare REIT, or generate 6.8% return on investment over 90 days.

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

American Healthcare REIT,  vs.  Boston Properties

American Healthcare REIT,

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Healthcare REIT, are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical indicators, American Healthcare may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Boston Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boston Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile 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.

Pair Trading with American Healthcare and Boston Properties

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

The idea behind American Healthcare REIT, and Boston 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.