Correlation Between CareTrust REIT and LXP Industrial

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

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

Diversification Opportunities for CareTrust REIT and LXP Industrial

0.73

Correlation Coefficient

CareTrust REIT  LXP Industrial

Poor diversification

The 3 months correlation between CareTrust and LXP is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding CareTrust REIT and LXP Industrial Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LXP Industrial Trust 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 LXP Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LXP Industrial Trust has no effect on the direction of CareTrust REIT i.e., CareTrust REIT and LXP Industrial go up and down completely randomly.

Pair Corralation between CareTrust REIT and LXP Industrial

Given the investment horizon of 90 days CareTrust REIT is expected to under-perform the LXP Industrial. But the stock apears to be less risky and, when comparing its historical volatility, CareTrust REIT is 1.02 times less risky than LXP Industrial. The stock trades about -0.12 of its potential returns per unit of risk. The LXP Industrial Trust is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  920.00  in LXP Industrial Trust on November 29, 2024 and sell it today you would lose (39.00) from holding LXP Industrial Trust or give up 4.24% of portfolio value over 90 days.

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

CareTrust REIT  vs.  LXP Industrial 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 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.

LXP Industrial Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days LXP Industrial Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, LXP Industrial is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with CareTrust REIT and LXP Industrial

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

The idea behind CareTrust REIT and LXP Industrial 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.