Correlation Between National Health and CareTrust REIT
Can any of the company-specific risk be diversified away by investing in both National Health 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 National Health and CareTrust REIT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Health Investors and CareTrust REIT, you can compare the effects of market volatilities on National Health 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 National Health with a short position of CareTrust REIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and CareTrust REIT.
Diversification Opportunities for National Health and CareTrust REIT
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between National and CareTrust is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and CareTrust REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareTrust REIT and National Health 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 National Health Investors 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 National Health i.e., National Health and CareTrust REIT go up and down completely randomly.
Pair Corralation between National Health and CareTrust REIT
Considering the 90-day investment horizon National Health is expected to generate 1.06 times less return on investment than CareTrust REIT. In addition to that, National Health is 1.1 times more volatile than CareTrust REIT. It trades about 0.1 of its total potential returns per unit of risk. CareTrust REIT is currently generating about 0.12 per unit of volatility. If you would invest 1,810 in CareTrust REIT on August 27, 2024 and sell it today you would earn a total of 1,220 from holding CareTrust REIT or generate 67.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Health Investors vs. CareTrust REIT
Performance |
| Timeline |
| National Health Investors |
| CareTrust REIT |
National Health and CareTrust REIT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Health and CareTrust REIT
The main advantage of trading using opposite National Health and CareTrust REIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health 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.| National Health vs. Global Medical REIT | National Health vs. Healthpeak Properties | National Health vs. Ventas Inc | National Health vs. Omega Healthcare Investors |
| 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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