Correlation Between Newmark and CareTrust REIT

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

By analyzing existing cross correlation between Newmark Group and CareTrust REIT, you can compare the effects of market volatilities on Newmark and CareTrust 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 Newmark with a short position of CareTrust REIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newmark and CareTrust REIT.

Diversification Opportunities for Newmark and CareTrust REIT

0.64

Correlation Coefficient

Newmark  CareTrust REIT

Poor diversification

The 3 months correlation between Newmark and CareTrust is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Newmark Group and CareTrust REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareTrust REIT and Newmark 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 Newmark Group are associated (or correlated) with CareTrust REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareTrust REIT has no effect on the direction of Newmark i.e., Newmark and CareTrust REIT go up and down completely randomly.

Pair Corralation between Newmark and CareTrust REIT

Given the investment horizon of 90 days Newmark Group is expected to generate 2.04 times more return on investment than CareTrust REIT. However, Newmark is 2.04 times more volatile than CareTrust REIT. It trades about 0.05 of its potential returns per unit of risk. CareTrust REIT is currently generating about 0.08 per unit of risk. If you would invest  813.00  in Newmark Group on September 29, 2024 and sell it today you would earn a total of  470.00  from holding Newmark Group or generate 57.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Newmark Group  vs.  CareTrust REIT

Newmark Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

CareTrust REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CareTrust REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating 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.

Pair Trading with Newmark and CareTrust REIT

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

The idea behind Newmark Group and CareTrust 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.