Correlation Between American Healthcare and Ventas

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

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

Diversification Opportunities for American Healthcare and Ventas

0.01

Correlation Coefficient

American Healthcare  Ventas

Significant diversification

The 3 months correlation between American and Ventas is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding American Healthcare REIT and Ventas Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ventas Inc and American Healthcare 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 American Healthcare REIT are associated (or correlated) with Ventas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ventas Inc has no effect on the direction of American Healthcare i.e., American Healthcare and Ventas go up and down completely randomly.

Pair Corralation between American Healthcare and Ventas

Considering the 90-day investment horizon American Healthcare REIT is expected to generate 0.94 times more return on investment than Ventas. However, American Healthcare REIT is 1.06 times less risky than Ventas. It trades about 0.06 of its potential returns per unit of risk. Ventas Inc is currently generating about -0.01 per unit of risk. If you would invest  1,299  in American Healthcare REIT on January 29, 2024 and sell it today you would earn a total of  69.00  from holding American Healthcare REIT or generate 5.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	12.0%
Values	Daily Returns

American Healthcare REIT  vs.  Ventas Inc

American Healthcare REIT

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Healthcare REIT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical indicators, American Healthcare may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Ventas Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ventas Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with American Healthcare and Ventas

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

The idea behind American Healthcare REIT and Ventas Inc 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.