Correlation Between Urban Edge and Community Healthcare

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

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

Diversification Opportunities for Urban Edge and Community Healthcare

0.14

Correlation Coefficient

Urban Edge  Community Healthcare

Average diversification

The 3 months correlation between Urban and Community is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Urban Edge Properties and Community Healthcare Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Healthcare and Urban Edge 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 Urban Edge Properties are associated (or correlated) with Community Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Healthcare has no effect on the direction of Urban Edge i.e., Urban Edge and Community Healthcare go up and down completely randomly.

Pair Corralation between Urban Edge and Community Healthcare

Allowing for the 90-day total investment horizon Urban Edge Properties is expected to under-perform the Community Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Urban Edge Properties is 1.07 times less risky than Community Healthcare. The stock trades about -0.11 of its potential returns per unit of risk. The Community Healthcare Trust is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,836  in Community Healthcare Trust on December 28, 2024 and sell it today you would lose (34.00) from holding Community Healthcare Trust or give up 1.85% of portfolio value over 90 days.

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

Urban Edge Properties  vs.  Community Healthcare Trust

Urban Edge Properties

Risk-Adjusted Performance

Very Weak

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

Community Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Community Healthcare Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Community Healthcare is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Urban Edge and Community Healthcare

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

The idea behind Urban Edge Properties and Community 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.