Correlation Between CareTrust REIT and Modiv

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

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

Diversification Opportunities for CareTrust REIT and Modiv

0.73

Correlation Coefficient

CareTrust REIT  Modiv

Poor diversification

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

Pair Corralation between CareTrust REIT and Modiv

Given the investment horizon of 90 days CareTrust REIT is expected to under-perform the Modiv. But the stock apears to be less risky and, when comparing its historical volatility, CareTrust REIT is 1.05 times less risky than Modiv. The stock trades about -0.14 of its potential returns per unit of risk. The Modiv Inc is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,596  in Modiv Inc on October 1, 2024 and sell it today you would lose (101.00) from holding Modiv Inc or give up 6.33% 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.  Modiv Inc

CareTrust REIT

Risk-Adjusted Performance

0 of 100

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.

Modiv Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Modiv Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Modiv is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with CareTrust REIT and Modiv

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

The idea behind CareTrust REIT and Modiv 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.