Correlation Between Community Healthcare and CareTrust REIT
Can any of the company-specific risk be diversified away by investing in both Community Healthcare and CareTrust REIT 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 Community Healthcare and CareTrust REIT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Community Healthcare Trust and CareTrust REIT, you can compare the effects of market volatilities on Community Healthcare and CareTrust REIT 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 Community Healthcare with a short position of CareTrust REIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community Healthcare and CareTrust REIT.
Diversification Opportunities for Community Healthcare and CareTrust REIT
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Community and CareTrust is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Community Healthcare Trust and CareTrust REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareTrust REIT and Community 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 Community Healthcare Trust are associated (or correlated) with CareTrust REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareTrust REIT has no effect on the direction of Community Healthcare i.e., Community Healthcare and CareTrust REIT go up and down completely randomly.
Pair Corralation between Community Healthcare and CareTrust REIT
Given the investment horizon of 90 days Community Healthcare Trust is expected to generate 1.72 times more return on investment than CareTrust REIT. However, Community Healthcare is 1.72 times more volatile than CareTrust REIT. It trades about 0.03 of its potential returns per unit of risk. CareTrust REIT is currently generating about 0.03 per unit of risk. If you would invest 1,818 in Community Healthcare Trust on August 28, 2024 and sell it today you would earn a total of 42.00 from holding Community Healthcare Trust or generate 2.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Community Healthcare Trust vs. CareTrust REIT
Performance |
| Timeline |
| Community Healthcare |
| CareTrust REIT |
Community Healthcare and CareTrust REIT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community Healthcare and CareTrust REIT
The main advantage of trading using opposite Community Healthcare and CareTrust REIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community Healthcare position performs unexpectedly, CareTrust REIT 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 CareTrust REIT will offset losses from the drop in CareTrust REIT's long position.| Community Healthcare vs. Global Medical REIT | Community Healthcare vs. National Health Investors | Community Healthcare vs. Healthpeak Properties | Community Healthcare vs. Sabra Healthcare REIT |
| CareTrust REIT vs. Global Medical REIT | CareTrust REIT vs. Universal Health Realty | CareTrust REIT vs. Healthpeak Properties | CareTrust REIT vs. Healthcare Realty Trust |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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