Correlation Between Healthcare Realty and Weyerhaeuser

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

Diversification Opportunities for Healthcare Realty and Weyerhaeuser

0.15

Correlation Coefficient

Healthcare Realty  Weyerhaeuser

Average diversification

The 3 months correlation between Healthcare and Weyerhaeuser is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Realty Trust and Weyerhaeuser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weyerhaeuser 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 Weyerhaeuser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weyerhaeuser has no effect on the direction of Healthcare Realty i.e., Healthcare Realty and Weyerhaeuser go up and down completely randomly.

Pair Corralation between Healthcare Realty and Weyerhaeuser

Allowing for the 90-day total investment horizon Healthcare Realty Trust is expected to generate 1.06 times more return on investment than Weyerhaeuser. However, Healthcare Realty is 1.06 times more volatile than Weyerhaeuser. It trades about -0.05 of its potential returns per unit of risk. Weyerhaeuser is currently generating about -0.19 per unit of risk. If you would invest  1,786  in Healthcare Realty Trust on September 21, 2024 and sell it today you would lose (98.00) from holding Healthcare Realty Trust or give up 5.49% of portfolio value over 90 days.

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

Healthcare Realty Trust  vs.  Weyerhaeuser

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.

Weyerhaeuser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weyerhaeuser has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Healthcare Realty and Weyerhaeuser

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

The idea behind Healthcare Realty Trust and Weyerhaeuser 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.