Correlation Between CareTrust REIT and Ventas

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

By analyzing existing cross correlation between CareTrust REIT and Ventas Inc, you can compare the effects of market volatilities on CareTrust REIT and Ventas 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 CareTrust REIT with a short position of Ventas. Check out your portfolio center. Please also check ongoing floating volatility patterns of CareTrust REIT and Ventas.

Diversification Opportunities for CareTrust REIT and Ventas

0.77

Correlation Coefficient

CareTrust REIT  Ventas

Poor diversification

The 3 months correlation between CareTrust and Ventas is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding CareTrust REIT and Ventas Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ventas Inc and CareTrust REIT 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 CareTrust REIT are associated (or correlated) with Ventas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ventas Inc has no effect on the direction of CareTrust REIT i.e., CareTrust REIT and Ventas go up and down completely randomly.

Pair Corralation between CareTrust REIT and Ventas

Given the investment horizon of 90 days CareTrust REIT is expected to generate 1.15 times more return on investment than Ventas. However, CareTrust REIT is 1.15 times more volatile than Ventas Inc. It trades about -0.08 of its potential returns per unit of risk. Ventas Inc is currently generating about -0.09 per unit of risk. If you would invest  3,091  in CareTrust REIT on September 14, 2024 and sell it today you would lose (225.00) from holding CareTrust REIT or give up 7.28% of portfolio value over 90 days.

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

CareTrust REIT  vs.  Ventas Inc

CareTrust REIT

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ventas Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ventas Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with CareTrust REIT and Ventas

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

The idea behind CareTrust REIT and Ventas Inc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.