Correlation Between Healthcare Realty and Power REIT

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

Diversification Opportunities for Healthcare Realty and Power REIT

-0.38

Correlation Coefficient

Healthcare Realty  Power REIT

Very good diversification

The 3 months correlation between Healthcare and Power is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Realty Trust and Power REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power REIT 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 Power REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power REIT has no effect on the direction of Healthcare Realty i.e., Healthcare Realty and Power REIT go up and down completely randomly.

Pair Corralation between Healthcare Realty and Power REIT

Allowing for the 90-day total investment horizon Healthcare Realty Trust is expected to generate 0.27 times more return on investment than Power REIT. However, Healthcare Realty Trust is 3.69 times less risky than Power REIT. It trades about 0.03 of its potential returns per unit of risk. Power REIT is currently generating about 0.0 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Healthcare Realty Trust  vs.  Power REIT

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.

Power REIT

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Healthcare Realty and Power REIT

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

The idea behind Healthcare Realty Trust and Power REIT 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.