Correlation Between Lead Real and Community Healthcare

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

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

Diversification Opportunities for Lead Real and Community Healthcare

0.84

Correlation Coefficient

Lead Real  Community Healthcare

Very poor diversification

The 3 months correlation between Lead and Community is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Lead Real Estate and Community Healthcare Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Healthcare and Lead Real 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 Lead Real Estate are associated (or correlated) with Community Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Healthcare has no effect on the direction of Lead Real i.e., Lead Real and Community Healthcare go up and down completely randomly.

Pair Corralation between Lead Real and Community Healthcare

Considering the 90-day investment horizon Lead Real Estate is expected to under-perform the Community Healthcare. In addition to that, Lead Real is 4.47 times more volatile than Community Healthcare Trust. It trades about -0.09 of its total potential returns per unit of risk. Community Healthcare Trust is currently generating about -0.11 per unit of volatility. If you would invest  1,860  in Community Healthcare Trust on September 25, 2024 and sell it today you would lose (66.00) from holding Community Healthcare Trust or give up 3.55% of portfolio value over 90 days.

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

Lead Real Estate  vs.  Community Healthcare Trust

Lead Real Estate

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lead Real Estate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Lead Real exhibited solid returns over the last few months and may actually be approaching a breakup point.

Community Healthcare

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Community Healthcare Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, Community Healthcare may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lead Real and Community Healthcare

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

The idea behind Lead Real Estate and Community 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.