Correlation Between Healthcare Realty and Office Properties

Can any of the company-specific risk be diversified away by investing in both Healthcare Realty and Office Properties 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 Office Properties 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 Office Properties Income, you can compare the effects of market volatilities on Healthcare Realty and Office Properties 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 Office Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Healthcare Realty and Office Properties.

Diversification Opportunities for Healthcare Realty and Office Properties

-0.55

Correlation Coefficient

Healthcare Realty  Office Properties

Excellent diversification

The 3 months correlation between Healthcare and Office is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Realty Trust and Office Properties Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Office Properties Income 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 Office Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Office Properties Income has no effect on the direction of Healthcare Realty i.e., Healthcare Realty and Office Properties go up and down completely randomly.

Pair Corralation between Healthcare Realty and Office Properties

Allowing for the 90-day total investment horizon Healthcare Realty Trust is expected to generate 0.42 times more return on investment than Office Properties. However, Healthcare Realty Trust is 2.39 times less risky than Office Properties. It trades about 0.03 of its potential returns per unit of risk. Office Properties Income is currently generating about -0.17 per unit of risk. If you would invest  1,633  in Healthcare Realty Trust on December 28, 2024 and sell it today you would earn a total of  30.50  from holding Healthcare Realty Trust or generate 1.87% return on investment over 90 days.

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

Healthcare Realty Trust  vs.  Office Properties Income

Healthcare Realty Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Realty Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Healthcare Realty is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Office Properties Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Office Properties Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Healthcare Realty and Office Properties

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

The idea behind Healthcare Realty Trust and Office Properties Income 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.