Correlation Between CareTrust REIT and Boston Properties

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

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

Diversification Opportunities for CareTrust REIT and Boston Properties

0.93

Correlation Coefficient

CareTrust REIT  Boston Properties

Almost no diversification

The 3 months correlation between CareTrust and Boston is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding CareTrust REIT and Boston Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Properties and CareTrust REIT 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 CareTrust REIT are associated (or correlated) with Boston Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Properties has no effect on the direction of CareTrust REIT i.e., CareTrust REIT and Boston Properties go up and down completely randomly.

Pair Corralation between CareTrust REIT and Boston Properties

Given the investment horizon of 90 days CareTrust REIT is expected to generate 0.78 times more return on investment than Boston Properties. However, CareTrust REIT is 1.28 times less risky than Boston Properties. It trades about -0.11 of its potential returns per unit of risk. Boston Properties is currently generating about -0.09 per unit of risk. If you would invest  2,885  in CareTrust REIT on December 2, 2024 and sell it today you would lose (298.00) from holding CareTrust REIT or give up 10.33% of portfolio value over 90 days.

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

CareTrust REIT  vs.  Boston Properties

CareTrust REIT

Risk-Adjusted Performance

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.

Boston Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boston Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with CareTrust REIT and Boston Properties

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

The idea behind CareTrust REIT and Boston 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.