Correlation Between Healthcare Realty and Best Buy

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

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

Diversification Opportunities for Healthcare Realty and Best Buy

0.11

Correlation Coefficient

Healthcare Realty  Best Buy

Average diversification

The 3 months correlation between Healthcare and Best is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Realty Trust and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and Healthcare Realty 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 Healthcare Realty Trust are associated (or correlated) with Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Healthcare Realty i.e., Healthcare Realty and Best Buy go up and down completely randomly.

Pair Corralation between Healthcare Realty and Best Buy

Assuming the 90 days trading horizon Healthcare Realty Trust is expected to under-perform the Best Buy. In addition to that, Healthcare Realty is 1.43 times more volatile than Best Buy Co. It trades about -0.46 of its total potential returns per unit of risk. Best Buy Co is currently generating about -0.33 per unit of volatility. If you would invest  52,832  in Best Buy Co on October 23, 2024 and sell it today you would lose (2,959) from holding Best Buy Co or give up 5.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	70.59%
Values	Daily Returns

Healthcare Realty Trust  vs.  Best Buy Co

Healthcare Realty Trust

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Healthcare Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Healthcare Realty is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Best Buy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Best Buy Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Healthcare Realty and Best Buy

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

The idea behind Healthcare Realty Trust and Best Buy Co 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.