Correlation Between Community Healthcare and Ventas

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

Diversification Opportunities for Community Healthcare and Ventas

-0.28

Correlation Coefficient

Community Healthcare  Ventas

Very good diversification

The 3 months correlation between Community and Ventas is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Community Healthcare Trust and Ventas Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ventas Inc 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 Ventas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ventas Inc has no effect on the direction of Community Healthcare i.e., Community Healthcare and Ventas go up and down completely randomly.

Pair Corralation between Community Healthcare and Ventas

Given the investment horizon of 90 days Community Healthcare is expected to generate 86.06 times less return on investment than Ventas. But when comparing it to its historical volatility, Community Healthcare Trust is 1.07 times less risky than Ventas. It trades about 0.0 of its potential returns per unit of risk. Ventas Inc is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  5,806  in Ventas Inc on December 29, 2024 and sell it today you would earn a total of  1,070  from holding Ventas Inc or generate 18.43% 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.  Ventas Inc

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.

Ventas Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ventas Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Ventas reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Community Healthcare and Ventas

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

The idea behind Community Healthcare Trust and Ventas Inc 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.