Correlation Between Ventas and CareTrust REIT
Can any of the company-specific risk be diversified away by investing in both Ventas 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 Ventas and CareTrust REIT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ventas Inc and CareTrust REIT, you can compare the effects of market volatilities on Ventas 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 Ventas with a short position of CareTrust REIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ventas and CareTrust REIT.
Diversification Opportunities for Ventas and CareTrust REIT
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ventas and CareTrust is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ventas Inc and CareTrust REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareTrust REIT 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 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 Ventas i.e., Ventas and CareTrust REIT go up and down completely randomly.
Pair Corralation between Ventas and CareTrust REIT
Considering the 90-day investment horizon Ventas Inc is expected to under-perform the CareTrust REIT. But the stock apears to be less risky and, when comparing its historical volatility, Ventas Inc is 1.81 times less risky than CareTrust REIT. The stock trades about -0.09 of its potential returns per unit of risk. The CareTrust REIT is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 3,085 in CareTrust REIT on August 24, 2024 and sell it today you would lose (11.00) from holding CareTrust REIT or give up 0.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ventas Inc vs. CareTrust REIT
Performance |
| Timeline |
| Ventas Inc |
| CareTrust REIT |
Ventas and CareTrust REIT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ventas and CareTrust REIT
The main advantage of trading using opposite Ventas and CareTrust REIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ventas 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.| Ventas vs. Healthcare Realty Trust | Ventas vs. Healthpeak Properties | Ventas vs. Universal Health Realty | Ventas vs. Global Medical 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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