Correlation Between Target Healthcare and Aberforth Smaller

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

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

Diversification Opportunities for Target Healthcare and Aberforth Smaller

0.64

Correlation Coefficient

Target Healthcare  Aberforth Smaller

Poor diversification

The 3 months correlation between Target and Aberforth is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Target Healthcare REIT and Aberforth Smaller Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberforth Smaller and Target 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 Target Healthcare REIT are associated (or correlated) with Aberforth Smaller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberforth Smaller has no effect on the direction of Target Healthcare i.e., Target Healthcare and Aberforth Smaller go up and down completely randomly.

Pair Corralation between Target Healthcare and Aberforth Smaller

Assuming the 90 days trading horizon Target Healthcare is expected to generate 4.82 times less return on investment than Aberforth Smaller. In addition to that, Target Healthcare is 1.23 times more volatile than Aberforth Smaller Companies. It trades about 0.05 of its total potential returns per unit of risk. Aberforth Smaller Companies is currently generating about 0.3 per unit of volatility. If you would invest  133,800  in Aberforth Smaller Companies on April 23, 2025 and sell it today you would earn a total of  22,600  from holding Aberforth Smaller Companies or generate 16.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Target Healthcare REIT  vs.  Aberforth Smaller Companies

Target Healthcare REIT

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Target Healthcare REIT are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Target Healthcare is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Aberforth Smaller

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aberforth Smaller Companies are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Aberforth Smaller exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Target Healthcare and Aberforth Smaller

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

The idea behind Target Healthcare REIT and Aberforth Smaller Companies 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.