Correlation Between LTC Properties and LXP Industrial

Can any of the company-specific risk be diversified away by investing in both LTC Properties and LXP Industrial 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 LTC Properties and LXP Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for LTC Properties and LXP Industrial

0.92

Correlation Coefficient

LTC Properties  LXP Industrial

Almost no diversification

The 3 months correlation between LTC and LXP is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding LTC Properties and LXP Industrial Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LXP Industrial Trust and LTC Properties 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 LTC Properties are associated (or correlated) with LXP Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LXP Industrial Trust has no effect on the direction of LTC Properties i.e., LTC Properties and LXP Industrial go up and down completely randomly.

Pair Corralation between LTC Properties and LXP Industrial

Considering the 90-day investment horizon LTC Properties is expected to generate 0.8 times more return on investment than LXP Industrial. However, LTC Properties is 1.25 times less risky than LXP Industrial. It trades about 0.03 of its potential returns per unit of risk. LXP Industrial Trust is currently generating about 0.01 per unit of risk. If you would invest  3,016  in LTC Properties on November 29, 2024 and sell it today you would earn a total of  461.00  from holding LTC Properties or generate 15.29% return on investment over 90 days.

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

LTC Properties  vs.  LXP Industrial Trust

LTC Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days LTC Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

LXP Industrial Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days LXP Industrial Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, LXP Industrial is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with LTC Properties and LXP Industrial

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

The idea behind LTC Properties and LXP Industrial 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.