Correlation Between Healthcare Realty and Realty Income
Can any of the company-specific risk be diversified away by investing in both Healthcare Realty and Realty Income 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 Healthcare Realty and Realty Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Healthcare Realty Trust and Realty Income, you can compare the effects of market volatilities on Healthcare Realty and Realty Income 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 Healthcare Realty with a short position of Realty Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Healthcare Realty and Realty Income.
Diversification Opportunities for Healthcare Realty and Realty Income
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Healthcare and Realty is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Realty Trust and Realty Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realty Income and Healthcare Realty 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 Healthcare Realty Trust are associated (or correlated) with Realty Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realty Income has no effect on the direction of Healthcare Realty i.e., Healthcare Realty and Realty Income go up and down completely randomly.
Pair Corralation between Healthcare Realty and Realty Income
Allowing for the 90-day total investment horizon Healthcare Realty is expected to generate 2.02 times less return on investment than Realty Income. But when comparing it to its historical volatility, Healthcare Realty Trust is 1.02 times less risky than Realty Income. It trades about 0.05 of its potential returns per unit of risk. Realty Income is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 5,260 in Realty Income on November 2, 2024 and sell it today you would earn a total of 146.00 from holding Realty Income or generate 2.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Healthcare Realty Trust vs. Realty Income
Performance |
| Timeline |
| Healthcare Realty Trust |
| Realty Income |
Healthcare Realty and Realty Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Healthcare Realty and Realty Income
The main advantage of trading using opposite Healthcare Realty and Realty Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Healthcare Realty position performs unexpectedly, Realty Income 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 Realty Income will offset losses from the drop in Realty Income's long position.| Healthcare Realty vs. Healthpeak Properties | Healthcare Realty vs. Sabra Healthcare REIT | Healthcare Realty vs. Community Healthcare Trust | Healthcare Realty vs. Universal Health Realty |
| Realty Income vs. Federal Realty Investment | Realty Income vs. Macerich Company | Realty Income vs. National Retail Properties | Realty Income vs. Kimco Realty |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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