Correlation Between Ventas and LTC Properties

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

By analyzing existing cross correlation between Ventas Inc and LTC Properties, you can compare the effects of market volatilities on Ventas and LTC Properties 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 LTC Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ventas and LTC Properties.

Diversification Opportunities for Ventas and LTC Properties

0.34

Correlation Coefficient

Ventas  LTC Properties

Weak diversification

The 3 months correlation between Ventas and LTC is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ventas Inc and LTC Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LTC Properties 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 LTC Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LTC Properties has no effect on the direction of Ventas i.e., Ventas and LTC Properties go up and down completely randomly.

Pair Corralation between Ventas and LTC Properties

Considering the 90-day investment horizon Ventas Inc is expected to generate 1.45 times more return on investment than LTC Properties. However, Ventas is 1.45 times more volatile than LTC Properties. It trades about 0.08 of its potential returns per unit of risk. LTC Properties is currently generating about -0.13 per unit of risk. If you would invest  6,358  in Ventas Inc on November 29, 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ventas Inc  vs.  LTC Properties

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.

LTC Properties

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Ventas and LTC Properties

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

The idea behind Ventas Inc and LTC Properties 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.