Correlation Between Ke Holdings and CareTrust REIT

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

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

Diversification Opportunities for Ke Holdings and CareTrust REIT

0.54

Correlation Coefficient

Ke Holdings  CareTrust REIT

Very weak diversification

The 3 months correlation between BEKE and CareTrust is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ke Holdings and CareTrust REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareTrust REIT and Ke Holdings 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 Ke Holdings 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 Ke Holdings i.e., Ke Holdings and CareTrust REIT go up and down completely randomly.

Pair Corralation between Ke Holdings and CareTrust REIT

Given the investment horizon of 90 days Ke Holdings is expected to generate 3.4 times more return on investment than CareTrust REIT. However, Ke Holdings is 3.4 times more volatile than CareTrust REIT. It trades about 0.06 of its potential returns per unit of risk. CareTrust REIT is currently generating about 0.06 per unit of risk. If you would invest  1,478  in Ke Holdings on September 29, 2024 and sell it today you would earn a total of  371.00  from holding Ke Holdings or generate 25.1% return on investment over 90 days.

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

Ke Holdings  vs.  CareTrust REIT

Ke Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ke Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, Ke Holdings is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the 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 Ke Holdings and CareTrust REIT

The main advantage of trading using opposite Ke Holdings and CareTrust REIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ke Holdings 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 Ke Holdings 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.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.