Correlation Between LTC Properties and CareTrust REIT

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

By analyzing existing cross correlation between LTC Properties and CareTrust REIT, you can compare the effects of market volatilities on LTC Properties and CareTrust REIT 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 LTC Properties with a short position of CareTrust REIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of LTC Properties and CareTrust REIT.

Diversification Opportunities for LTC Properties and CareTrust REIT

0.88

Correlation Coefficient

LTC Properties  CareTrust REIT

Very poor diversification

The 3 months correlation between LTC and CareTrust is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding LTC Properties and CareTrust REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareTrust REIT and LTC Properties 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 LTC Properties are associated (or correlated) with CareTrust REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareTrust REIT has no effect on the direction of LTC Properties i.e., LTC Properties and CareTrust REIT go up and down completely randomly.

Pair Corralation between LTC Properties and CareTrust REIT

Considering the 90-day investment horizon LTC Properties is expected to under-perform the CareTrust REIT. But the stock apears to be less risky and, when comparing its historical volatility, LTC Properties is 1.09 times less risky than CareTrust REIT. The stock trades about -0.07 of its potential returns per unit of risk. The CareTrust REIT is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,479  in CareTrust REIT on March 14, 2024 and sell it today you would earn a total of  45.00  from holding CareTrust REIT or generate 1.82% return on investment over 90 days.

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

LTC Properties  vs.  CareTrust REIT

LTC Properties

Risk-Adjusted Performance

8 of 100

OK

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

CareTrust REIT

Risk-Adjusted Performance

11 of 100

OK

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 weak basic indicators, CareTrust REIT may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with LTC Properties and CareTrust REIT

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

The idea behind LTC Properties and CareTrust REIT 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.