Correlation Between Ventas and Community Healthcare

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

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

Diversification Opportunities for Ventas and Community Healthcare

0.04

Correlation Coefficient

Ventas  Community Healthcare

Significant diversification

The 3 months correlation between Ventas and Community is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Ventas Inc and Community Healthcare Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Healthcare and Ventas 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 Ventas Inc 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 Ventas i.e., Ventas and Community Healthcare go up and down completely randomly.

Pair Corralation between Ventas and Community Healthcare

Considering the 90-day investment horizon Ventas Inc is expected to generate 0.97 times more return on investment than Community Healthcare. However, Ventas Inc is 1.03 times less risky than Community Healthcare. It trades about 0.08 of its potential returns per unit of risk. Community Healthcare Trust is currently generating about 0.01 per unit of risk. If you would invest  6,358  in Ventas Inc on November 28, 2024 and sell it today you would earn a total of  470.00  from holding Ventas Inc or generate 7.39% return on investment over 90 days.

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

Ventas Inc  vs.  Community Healthcare Trust

Ventas Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ventas Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Ventas may actually be approaching a critical reversion point that can send shares even higher in March 2025.

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 Ventas and Community Healthcare

The main advantage of trading using opposite Ventas and Community Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ventas 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 Ventas Inc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.