Correlation Between Community Healthcare and Urban Edge

Can any of the company-specific risk be diversified away by investing in both Community Healthcare and Urban Edge 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 Urban Edge 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 Urban Edge Properties, you can compare the effects of market volatilities on Community Healthcare and Urban Edge 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 Urban Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community Healthcare and Urban Edge.

Diversification Opportunities for Community Healthcare and Urban Edge

0.14

Correlation Coefficient

Community Healthcare  Urban Edge

Average diversification

The 3 months correlation between Community and Urban is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Community Healthcare Trust and Urban Edge Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Urban Edge Properties 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 Urban Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Urban Edge Properties has no effect on the direction of Community Healthcare i.e., Community Healthcare and Urban Edge go up and down completely randomly.

Pair Corralation between Community Healthcare and Urban Edge

Given the investment horizon of 90 days Community Healthcare Trust is expected to generate 1.07 times more return on investment than Urban Edge. However, Community Healthcare is 1.07 times more volatile than Urban Edge Properties. It trades about -0.01 of its potential returns per unit of risk. Urban Edge Properties is currently generating about -0.11 per unit of risk. If you would invest  1,836  in Community Healthcare Trust on December 28, 2024 and sell it today you would lose (34.00) from holding Community Healthcare Trust or give up 1.85% of portfolio value over 90 days.

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

Community Healthcare Trust  vs.  Urban Edge Properties

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.

Urban Edge Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Urban Edge Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental 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 Community Healthcare and Urban Edge

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

The idea behind Community Healthcare Trust and Urban Edge 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.