Correlation Between Wheeler Real and Community Healthcare

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

By analyzing existing cross correlation between Wheeler Real Estate and Community Healthcare Trust, you can compare the effects of market volatilities on Wheeler Real and Community Healthcare 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 Wheeler Real with a short position of Community Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wheeler Real and Community Healthcare.

Diversification Opportunities for Wheeler Real and Community Healthcare

0.79

Correlation Coefficient

Wheeler Real  Community Healthcare

Poor diversification

The 3 months correlation between Wheeler and Community is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Wheeler Real Estate and Community Healthcare Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Healthcare and Wheeler Real 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 Wheeler Real Estate are associated (or correlated) with Community Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Healthcare has no effect on the direction of Wheeler Real i.e., Wheeler Real and Community Healthcare go up and down completely randomly.

Pair Corralation between Wheeler Real and Community Healthcare

Given the investment horizon of 90 days Wheeler Real Estate is expected to under-perform the Community Healthcare. In addition to that, Wheeler Real is 4.1 times more volatile than Community Healthcare Trust. It trades about -0.31 of its total potential returns per unit of risk. Community Healthcare Trust is currently generating about -0.23 per unit of volatility. If you would invest  2,596  in Community Healthcare Trust on February 23, 2024 and sell it today you would lose (225.00) from holding Community Healthcare Trust or give up 8.67% of portfolio value over 90 days.

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

Wheeler Real Estate  vs.  Community Healthcare Trust

Wheeler Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wheeler Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Community Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Community Healthcare Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Wheeler Real and Community Healthcare

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

The idea behind Wheeler Real Estate and Community Healthcare 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.