Correlation Between Office Properties and Diversified Healthcare

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

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

Diversification Opportunities for Office Properties and Diversified Healthcare

-0.15

Correlation Coefficient

Office Properties  Diversified Healthcare

Good diversification

The 3 months correlation between Office and Diversified is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Office Properties Income and Diversified Healthcare Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Healthcare and Office 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 Office Properties Income are associated (or correlated) with Diversified Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Healthcare has no effect on the direction of Office Properties i.e., Office Properties and Diversified Healthcare go up and down completely randomly.

Pair Corralation between Office Properties and Diversified Healthcare

Assuming the 90 days horizon Office Properties Income is expected to under-perform the Diversified Healthcare. In addition to that, Office Properties is 2.96 times more volatile than Diversified Healthcare Trust. It trades about -0.09 of its total potential returns per unit of risk. Diversified Healthcare Trust is currently generating about 0.13 per unit of volatility. If you would invest  1,505  in Diversified Healthcare Trust on November 29, 2024 and sell it today you would earn a total of  118.00  from holding Diversified Healthcare Trust or generate 7.84% return on investment over 90 days.

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

Office Properties Income  vs.  Diversified Healthcare Trust

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 March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Diversified Healthcare

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Diversified Healthcare Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Diversified Healthcare may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Office Properties and Diversified Healthcare

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

The idea behind Office Properties Income and Diversified 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.