Correlation Between CareTrust REIT and Community Healthcare

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

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

Diversification Opportunities for CareTrust REIT and Community Healthcare

-0.45

Correlation Coefficient

CareTrust REIT  Community Healthcare

Very good diversification

The 3 months correlation between CareTrust and Community is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding CareTrust REIT and Community Healthcare Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Healthcare 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 Community Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Healthcare has no effect on the direction of CareTrust REIT i.e., CareTrust REIT and Community Healthcare go up and down completely randomly.

Pair Corralation between CareTrust REIT and Community Healthcare

Given the investment horizon of 90 days CareTrust REIT is expected to under-perform the Community Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, CareTrust REIT is 1.1 times less risky than Community Healthcare. The stock trades about -0.13 of its potential returns per unit of risk. The Community Healthcare Trust is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,843  in Community Healthcare Trust on November 29, 2024 and sell it today you would lose (16.00) from holding Community Healthcare Trust or give up 0.87% of portfolio value over 90 days.

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

CareTrust REIT  vs.  Community Healthcare Trust

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 unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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.

Pair Trading with CareTrust REIT and Community Healthcare

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

The idea behind CareTrust REIT and Community Healthcare 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.