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
The 3 months correlation between Healthcare and Camden is 0.84. 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 generate 0.92 times more return on investment than Camden Property. However, Healthcare Realty Trust is 1.09 times less risky than Camden Property. It trades about 0.28 of its potential returns per unit of risk. Camden Property Trust is currently generating about 0.14 per unit of risk. If you would invest 1,359 in Healthcare Realty Trust on March 6, 2024 and sell it today you would earn a total of 263.00 from holding Healthcare Realty Trust or generate 19.35% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Realty Trust are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Healthcare Realty reported solid returns over the last few months and may actually be approaching a breakup point.
Compared to the overall equity markets, risk-adjusted returns on investments in Camden Property Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Camden Property may actually be approaching a critical reversion point that can send shares even higher in July 2024.