Correlation Between Community Healthcare and Welltower

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

Diversification Opportunities for Community Healthcare and Welltower

0.66

Correlation Coefficient

Community Healthcare  Welltower

Poor diversification

The 3 months correlation between Community and Welltower is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Community Healthcare Trust and Welltower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welltower 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 Welltower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Welltower has no effect on the direction of Community Healthcare i.e., Community Healthcare and Welltower go up and down completely randomly.

Pair Corralation between Community Healthcare and Welltower

Given the investment horizon of 90 days Community Healthcare Trust is expected to generate 1.44 times more return on investment than Welltower. However, Community Healthcare is 1.44 times more volatile than Welltower. It trades about 0.05 of its potential returns per unit of risk. Welltower is currently generating about 0.0 per unit of risk. If you would invest  1,771  in Community Healthcare Trust on September 28, 2024 and sell it today you would earn a total of  84.00  from holding Community Healthcare Trust or generate 4.74% return on investment over 90 days.

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

Community Healthcare Trust  vs.  Welltower

Community Healthcare

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Community Healthcare Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Welltower

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Welltower has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Welltower is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Community Healthcare and Welltower

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

The idea behind Community Healthcare Trust and Welltower 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.