Correlation Between Spire Healthcare and Target Healthcare

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

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

Diversification Opportunities for Spire Healthcare and Target Healthcare

0.49

Correlation Coefficient

Spire Healthcare  Target Healthcare

Very weak diversification

The 3 months correlation between Spire and Target is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Spire Healthcare Group and Target Healthcare REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Healthcare REIT and Spire Healthcare 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 Spire Healthcare Group are associated (or correlated) with Target Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Healthcare REIT has no effect on the direction of Spire Healthcare i.e., Spire Healthcare and Target Healthcare go up and down completely randomly.

Pair Corralation between Spire Healthcare and Target Healthcare

Assuming the 90 days trading horizon Spire Healthcare Group is expected to under-perform the Target Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Spire Healthcare Group is 1.44 times less risky than Target Healthcare. The stock trades about 0.0 of its potential returns per unit of risk. The Target Healthcare REIT is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7,285  in Target Healthcare REIT on September 25, 2024 and sell it today you would earn a total of  935.00  from holding Target Healthcare REIT or generate 12.83% return on investment over 90 days.

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

Spire Healthcare Group  vs.  Target Healthcare REIT

Spire Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spire Healthcare Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Spire Healthcare is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Target Healthcare REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Target Healthcare REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Spire Healthcare and Target Healthcare

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

The idea behind Spire Healthcare Group and Target 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.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.