Correlation Between Bellevue Healthcare and CAP LEASE

Can any of the company-specific risk be diversified away by investing in both Bellevue Healthcare and CAP LEASE 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 Bellevue Healthcare and CAP LEASE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bellevue Healthcare Trust and CAP LEASE AVIATION, you can compare the effects of market volatilities on Bellevue Healthcare and CAP LEASE 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 Bellevue Healthcare with a short position of CAP LEASE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bellevue Healthcare and CAP LEASE.

Diversification Opportunities for Bellevue Healthcare and CAP LEASE

0.86

Correlation Coefficient

Bellevue Healthcare  CAP LEASE

Very poor diversification

The 3 months correlation between Bellevue and CAP is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Bellevue Healthcare Trust and CAP LEASE AVIATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAP LEASE AVIATION and Bellevue 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 Bellevue Healthcare Trust are associated (or correlated) with CAP LEASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAP LEASE AVIATION has no effect on the direction of Bellevue Healthcare i.e., Bellevue Healthcare and CAP LEASE go up and down completely randomly.

Pair Corralation between Bellevue Healthcare and CAP LEASE

Assuming the 90 days trading horizon Bellevue Healthcare Trust is expected to generate 0.4 times more return on investment than CAP LEASE. However, Bellevue Healthcare Trust is 2.5 times less risky than CAP LEASE. It trades about -0.17 of its potential returns per unit of risk. CAP LEASE AVIATION is currently generating about -0.21 per unit of risk. If you would invest  15,660  in Bellevue Healthcare Trust on August 31, 2024 and sell it today you would lose (1,560) from holding Bellevue Healthcare Trust or give up 9.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Bellevue Healthcare Trust  vs.  CAP LEASE AVIATION

Bellevue Healthcare Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bellevue Healthcare Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

CAP LEASE AVIATION

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CAP LEASE AVIATION has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Bellevue Healthcare and CAP LEASE

The main advantage of trading using opposite Bellevue Healthcare and CAP LEASE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bellevue Healthcare position performs unexpectedly, CAP LEASE 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 CAP LEASE will offset losses from the drop in CAP LEASE's long position.

The idea behind Bellevue Healthcare Trust and CAP LEASE AVIATION pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.