Correlation Between Elme Communities and American Healthcare

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

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

Diversification Opportunities for Elme Communities and American Healthcare

-0.47

Correlation Coefficient

Elme Communities  American Healthcare

Very good diversification

The 3 months correlation between Elme and American is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Elme Communities and American Healthcare REIT, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Healthcare REIT, and Elme Communities 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 Elme Communities are associated (or correlated) with American Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Healthcare REIT, has no effect on the direction of Elme Communities i.e., Elme Communities and American Healthcare go up and down completely randomly.

Pair Corralation between Elme Communities and American Healthcare

Given the investment horizon of 90 days Elme Communities is expected to under-perform the American Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Elme Communities is 1.22 times less risky than American Healthcare. The stock trades about -0.19 of its potential returns per unit of risk. The American Healthcare REIT, is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,603  in American Healthcare REIT, on September 22, 2024 and sell it today you would earn a total of  172.00  from holding American Healthcare REIT, or generate 6.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Elme Communities  vs.  American Healthcare REIT,

Elme Communities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elme Communities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

American Healthcare REIT,

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Healthcare REIT, are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical indicators, American Healthcare may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Elme Communities and American Healthcare

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

The idea behind Elme Communities and American Healthcare REIT, 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..