Correlation Between Healthcare Realty and Healthcare Trust

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

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

Diversification Opportunities for Healthcare Realty and Healthcare Trust

-0.47

Correlation Coefficient

Healthcare Realty  Healthcare Trust

Very good diversification

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

Pair Corralation between Healthcare Realty and Healthcare Trust

Allowing for the 90-day total investment horizon Healthcare Realty is expected to generate 1.01 times less return on investment than Healthcare Trust. But when comparing it to its historical volatility, Healthcare Realty Trust is 1.34 times less risky than Healthcare Trust. It trades about 0.02 of its potential returns per unit of risk. Healthcare Trust Preferred is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,504  in Healthcare Trust Preferred on September 13, 2024 and sell it today you would earn a total of  21.00  from holding Healthcare Trust Preferred or generate 1.4% return on investment over 90 days.

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

Healthcare Realty Trust  vs.  Healthcare Trust Preferred

Healthcare Realty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Healthcare Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Healthcare Realty is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Healthcare Trust Pre

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Healthcare Trust Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Healthcare Trust is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Healthcare Realty and Healthcare Trust

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

The idea behind Healthcare Realty Trust and Healthcare Trust Preferred 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.