Correlation Between Healthcare Realty and Camden Property

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

Diversification Opportunities for Healthcare Realty and Camden Property

0.87

Correlation Coefficient

Healthcare Realty  Camden Property

Very poor diversification

The 3 months correlation between Healthcare and Camden is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Realty Trust and Camden Property Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Camden Property Trust 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 Camden Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Camden Property Trust has no effect on the direction of Healthcare Realty i.e., Healthcare Realty and Camden Property go up and down completely randomly.

Pair Corralation between Healthcare Realty and Camden Property

Allowing for the 90-day total investment horizon Healthcare Realty Trust is expected to under-perform the Camden Property. In addition to that, Healthcare Realty is 1.16 times more volatile than Camden Property Trust. It trades about -0.01 of its total potential returns per unit of risk. Camden Property Trust is currently generating about -0.01 per unit of volatility. If you would invest  12,112  in Camden Property Trust on March 12, 2024 and sell it today you would lose (1,443) from holding Camden Property Trust or give up 11.91% of portfolio value over 90 days.

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

Healthcare Realty Trust  vs.  Camden Property Trust

Healthcare Realty Trust

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Realty Trust are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Healthcare Realty reported solid returns over the last few months and may actually be approaching a breakup point.

Camden Property Trust

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Camden Property Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Camden Property may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Healthcare Realty and Camden Property

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

The idea behind Healthcare Realty Trust and Camden Property Trust 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.