Correlation Between Target Healthcare and Capital Drilling

Can any of the company-specific risk be diversified away by investing in both Target Healthcare and Capital Drilling 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 Capital Drilling 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 Capital Drilling, you can compare the effects of market volatilities on Target Healthcare and Capital Drilling 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 Capital Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target Healthcare and Capital Drilling.

Diversification Opportunities for Target Healthcare and Capital Drilling

0.61

Correlation Coefficient

Target Healthcare  Capital Drilling

Poor diversification

The 3 months correlation between Target and Capital is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Target Healthcare REIT and Capital Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Drilling 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 Capital Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Drilling has no effect on the direction of Target Healthcare i.e., Target Healthcare and Capital Drilling go up and down completely randomly.

Pair Corralation between Target Healthcare and Capital Drilling

Assuming the 90 days trading horizon Target Healthcare is expected to generate 10.12 times less return on investment than Capital Drilling. But when comparing it to its historical volatility, Target Healthcare REIT is 2.23 times less risky than Capital Drilling. It trades about 0.05 of its potential returns per unit of risk. Capital Drilling is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  6,940  in Capital Drilling on April 22, 2025 and sell it today you would earn a total of  2,360  from holding Capital Drilling or generate 34.01% return on investment over 90 days.

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

Target Healthcare REIT  vs.  Capital Drilling

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.

Capital Drilling

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Drilling are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Capital Drilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Target Healthcare and Capital Drilling

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

The idea behind Target Healthcare REIT and Capital Drilling 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.