Correlation Between CareTrust REIT and Universal Health
Can any of the company-specific risk be diversified away by investing in both CareTrust REIT and Universal 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 Universal 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 Universal Health Realty, you can compare the effects of market volatilities on CareTrust REIT and Universal 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 Universal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of CareTrust REIT and Universal Health.
Diversification Opportunities for CareTrust REIT and Universal Health
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CareTrust and Universal is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding CareTrust REIT and Universal Health Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Health Realty 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 Universal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Health Realty has no effect on the direction of CareTrust REIT i.e., CareTrust REIT and Universal Health go up and down completely randomly.
Pair Corralation between CareTrust REIT and Universal Health
Given the investment horizon of 90 days CareTrust REIT is expected to generate 0.54 times more return on investment than Universal Health. However, CareTrust REIT is 1.85 times less risky than Universal Health. It trades about 0.14 of its potential returns per unit of risk. Universal Health Realty is currently generating about 0.06 per unit of risk. If you would invest 2,330 in CareTrust REIT on March 14, 2024 and sell it today you would earn a total of 195.00 from holding CareTrust REIT or generate 8.37% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
CareTrust REIT vs. Universal Health Realty
Performance |
Timeline |
CareTrust REIT |
Universal Health Realty |
CareTrust REIT and Universal Health Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CareTrust REIT and Universal Health
The main advantage of trading using opposite CareTrust REIT and Universal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CareTrust REIT position performs unexpectedly, Universal 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 Universal Health will offset losses from the drop in Universal Health's long position.CareTrust REIT vs. Global Medical REIT | CareTrust REIT vs. Universal Health Realty | CareTrust REIT vs. Healthpeak Properties | CareTrust REIT vs. Healthcare Realty Trust |
Universal Health vs. Healthcare Realty Trust | Universal Health vs. Healthpeak Properties | Universal Health vs. Sabra Healthcare REIT | Universal Health vs. Community Healthcare Trust |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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