Correlation Between Power REIT and American Healthcare

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

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

Diversification Opportunities for Power REIT and American Healthcare

0.3

Correlation Coefficient

Power REIT  American Healthcare

Weak diversification

The 3 months correlation between Power and American is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Power REIT and American Healthcare REIT, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Healthcare REIT, and Power REIT 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 Power REIT are associated (or correlated) with American Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Healthcare REIT, has no effect on the direction of Power REIT i.e., Power REIT and American Healthcare go up and down completely randomly.

Pair Corralation between Power REIT and American Healthcare

Allowing for the 90-day total investment horizon Power REIT is expected to generate 1.98 times less return on investment than American Healthcare. In addition to that, Power REIT is 6.02 times more volatile than American Healthcare REIT,. It trades about 0.02 of its total potential returns per unit of risk. American Healthcare REIT, is currently generating about 0.21 per unit of volatility. If you would invest  1,254  in American Healthcare REIT, on October 13, 2024 and sell it today you would earn a total of  1,468  from holding American Healthcare REIT, or generate 117.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	47.18%
Values	Daily Returns

Power REIT  vs.  American Healthcare REIT,

Power REIT

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Power REIT are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Power REIT showed solid returns over the last few months and may actually be approaching a breakup point.

American Healthcare REIT,

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Healthcare REIT, are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical indicators, American Healthcare may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Power REIT and American Healthcare

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

The idea behind Power REIT and American Healthcare 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.