Correlation Between Community Healthcare and LTC Properties
Can any of the company-specific risk be diversified away by investing in both Community Healthcare 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 Community Healthcare and LTC Properties 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 LTC Properties, you can compare the effects of market volatilities on Community Healthcare 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 Community Healthcare with a short position of LTC Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community Healthcare and LTC Properties.
Diversification Opportunities for Community Healthcare and LTC Properties
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Community and LTC is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Community Healthcare Trust and LTC Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LTC Properties 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 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 Community Healthcare i.e., Community Healthcare and LTC Properties go up and down completely randomly.
Pair Corralation between Community Healthcare and LTC Properties
Given the investment horizon of 90 days Community Healthcare is expected to generate 1.11 times less return on investment than LTC Properties. In addition to that, Community Healthcare is 1.86 times more volatile than LTC Properties. It trades about 0.05 of its total potential returns per unit of risk. LTC Properties is currently generating about 0.1 per unit of volatility. If you would invest 3,566 in LTC Properties on September 2, 2024 and sell it today you would earn a total of 293.00 from holding LTC Properties or generate 8.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Community Healthcare Trust vs. LTC Properties
Performance |
| Timeline |
| Community Healthcare |
| LTC Properties |
Community Healthcare and LTC Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community Healthcare and LTC Properties
The main advantage of trading using opposite Community Healthcare and LTC Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community Healthcare 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.| Community Healthcare vs. Douglas Emmett | Community Healthcare vs. Vornado Realty Trust | Community Healthcare vs. Highwoods Properties | Community Healthcare vs. Piedmont Office Realty |
| LTC Properties vs. Medical Properties Trust | LTC Properties vs. Sabra Healthcare REIT | LTC Properties vs. Healthpeak Properties | LTC Properties vs. National Health Investors |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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