Correlation Between CareTrust REIT and National Health

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

By analyzing existing cross correlation between CareTrust REIT and National Health Investors, you can compare the effects of market volatilities on CareTrust REIT and National Health 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 National Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of CareTrust REIT and National Health.

Diversification Opportunities for CareTrust REIT and National Health

0.89

Correlation Coefficient

CareTrust REIT  National Health

Very poor diversification

The 3 months correlation between CareTrust and National is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding CareTrust REIT and National Health Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Health Investors 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 National Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Health Investors has no effect on the direction of CareTrust REIT i.e., CareTrust REIT and National Health go up and down completely randomly.

Pair Corralation between CareTrust REIT and National Health

Given the investment horizon of 90 days CareTrust REIT is expected to generate 1.22 times less return on investment than National Health. But when comparing it to its historical volatility, CareTrust REIT is 1.29 times less risky than National Health. It trades about 0.14 of its potential returns per unit of risk. National Health Investors is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  5,858  in National Health Investors on March 14, 2024 and sell it today you would earn a total of  605.00  from holding National Health Investors or generate 10.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

CareTrust REIT  vs.  National Health Investors

CareTrust REIT

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CareTrust REIT are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, CareTrust REIT may actually be approaching a critical reversion point that can send shares even higher in July 2024.

National Health Investors

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Health Investors are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical indicators, National Health may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with CareTrust REIT and National Health

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

The idea behind CareTrust REIT and National Health Investors 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.