Correlation Between Hudson Pacific and Diversified Healthcare

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

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

Diversification Opportunities for Hudson Pacific and Diversified Healthcare

0.7

Correlation Coefficient

Hudson Pacific  Diversified Healthcare

Poor diversification

The 3 months correlation between Hudson and Diversified is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Hudson Pacific Properties and Diversified Healthcare Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Healthcare and Hudson Pacific 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 Hudson Pacific Properties are associated (or correlated) with Diversified Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Healthcare has no effect on the direction of Hudson Pacific i.e., Hudson Pacific and Diversified Healthcare go up and down completely randomly.

Pair Corralation between Hudson Pacific and Diversified Healthcare

Considering the 90-day investment horizon Hudson Pacific Properties is expected to under-perform the Diversified Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Hudson Pacific Properties is 1.08 times less risky than Diversified Healthcare. The stock trades about -0.1 of its potential returns per unit of risk. The Diversified Healthcare Trust is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  347.00  in Diversified Healthcare Trust on August 30, 2024 and sell it today you would lose (86.00) from holding Diversified Healthcare Trust or give up 24.78% of portfolio value over 90 days.

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

Hudson Pacific Properties  vs.  Diversified Healthcare Trust

Hudson Pacific Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hudson Pacific Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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. In spite of weak performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Hudson Pacific and Diversified Healthcare

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

The idea behind Hudson Pacific Properties and Diversified 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.