Correlation Between Healthcare Realty and Real Estate

Can any of the company-specific risk be diversified away by investing in both Healthcare Realty and Real Estate 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 Real Estate 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 Real Estate Securities, you can compare the effects of market volatilities on Healthcare Realty and Real Estate 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 Real Estate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Healthcare Realty and Real Estate.

Diversification Opportunities for Healthcare Realty and Real Estate

-0.5

Correlation Coefficient

Healthcare Realty  Real Estate

Very good diversification

The 3 months correlation between Healthcare and Real is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Realty Trust and Real Estate Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate Securities 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 Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Securities has no effect on the direction of Healthcare Realty i.e., Healthcare Realty and Real Estate go up and down completely randomly.

Pair Corralation between Healthcare Realty and Real Estate

Allowing for the 90-day total investment horizon Healthcare Realty Trust is expected to under-perform the Real Estate. In addition to that, Healthcare Realty is 5.12 times more volatile than Real Estate Securities. It trades about -0.01 of its total potential returns per unit of risk. Real Estate Securities is currently generating about 0.6 per unit of volatility. If you would invest  2,950  in Real Estate Securities on September 19, 2024 and sell it today you would earn a total of  45.00  from holding Real Estate Securities or generate 1.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	33.33%
Values	Daily Returns

Healthcare Realty Trust  vs.  Real Estate Securities

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.

Real Estate Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Estate Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Real Estate is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Healthcare Realty and Real Estate

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

The idea behind Healthcare Realty Trust and Real Estate Securities 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.