Correlation Between National Health and CareTrust REIT

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Can any of the company-specific risk be diversified away by investing in both National Health 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 National Health and CareTrust REIT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Health Investors and CareTrust REIT, you can compare the effects of market volatilities on National Health 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 National Health with a short position of CareTrust REIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and CareTrust REIT.

Diversification Opportunities for National Health and CareTrust REIT

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between National and CareTrust is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and CareTrust REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareTrust REIT and National Health 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 National Health Investors 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 National Health i.e., National Health and CareTrust REIT go up and down completely randomly.

Pair Corralation between National Health and CareTrust REIT

Considering the 90-day investment horizon National Health is expected to generate 1.05 times less return on investment than CareTrust REIT. In addition to that, National Health is 1.11 times more volatile than CareTrust REIT. It trades about 0.2 of its total potential returns per unit of risk. CareTrust REIT is currently generating about 0.23 per unit of volatility. If you would invest  2,296  in CareTrust REIT on December 29, 2023 and sell it today you would earn a total of  123.00  from holding CareTrust REIT or generate 5.36% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

National Health Investors  vs.  CareTrust REIT

 Performance 
       Timeline  
National Health Investors 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in National Health Investors are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical indicators, National Health may actually be approaching a critical reversion point that can send shares even higher in April 2024.
CareTrust REIT 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in CareTrust REIT are ranked lower than 7 (%) 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 April 2024.

National Health and CareTrust REIT Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with National Health and CareTrust REIT

The main advantage of trading using opposite National Health and CareTrust REIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health 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 National Health Investors 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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