Correlation Between Community Healthcare and Healthcare Realty

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

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

Diversification Opportunities for Community Healthcare and Healthcare Realty

-0.26

Correlation Coefficient

Community Healthcare  Healthcare Realty

Very good diversification

The 3 months correlation between Community and Healthcare is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Community Healthcare Trust 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 Community 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 Community Healthcare Trust 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 Community Healthcare i.e., Community Healthcare and Healthcare Realty go up and down completely randomly.

Pair Corralation between Community Healthcare and Healthcare Realty

Given the investment horizon of 90 days Community Healthcare is expected to generate 15.21 times less return on investment than Healthcare Realty. In addition to that, Community Healthcare is 1.25 times more volatile than Healthcare Realty Trust. It trades about 0.0 of its total potential returns per unit of risk. Healthcare Realty Trust is currently generating about 0.04 per unit of volatility. If you would invest  1,633  in Healthcare Realty Trust on December 30, 2024 and sell it today you would earn a total of  43.00  from holding Healthcare Realty Trust or generate 2.63% return on investment over 90 days.

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

Community Healthcare Trust  vs.  Healthcare Realty Trust

Community Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Community Healthcare Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Community Healthcare is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Healthcare Realty Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Realty Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Healthcare Realty is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Community Healthcare and Healthcare Realty

The main advantage of trading using opposite Community Healthcare and Healthcare Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community Healthcare 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 Community Healthcare Trust 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.