Correlation Between Diversified Healthcare and DHCNI

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

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

Diversification Opportunities for Diversified Healthcare and DHCNI

0.96

Correlation Coefficient

Diversified Healthcare  DHCNI

Almost no diversification

The 3 months correlation between Diversified and DHCNI is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Diversified Healthcare Trust and DHCNI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHCNI and Diversified 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 Diversified Healthcare Trust are associated (or correlated) with DHCNI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHCNI has no effect on the direction of Diversified Healthcare i.e., Diversified Healthcare and DHCNI go up and down completely randomly.

Pair Corralation between Diversified Healthcare and DHCNI

Assuming the 90 days horizon Diversified Healthcare Trust is expected to under-perform the DHCNI. In addition to that, Diversified Healthcare is 1.17 times more volatile than DHCNI. It trades about 0.0 of its total potential returns per unit of risk. DHCNI is currently generating about 0.06 per unit of volatility. If you would invest  1,409  in DHCNI on September 3, 2024 and sell it today you would earn a total of  77.00  from holding DHCNI or generate 5.46% return on investment over 90 days.

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

Diversified Healthcare Trust  vs.  DHCNI

Diversified Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

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

DHCNI

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DHCNI are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, DHCNI is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Diversified Healthcare and DHCNI

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

The idea behind Diversified Healthcare Trust and DHCNI 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.