Correlation Between Medical Properties and Electronic Systems

Can any of the company-specific risk be diversified away by investing in both Medical Properties and Electronic Systems 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 Medical Properties and Electronic Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Medical Properties Trust and Electronic Systems Technology, you can compare the effects of market volatilities on Medical Properties and Electronic Systems 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 Medical Properties with a short position of Electronic Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medical Properties and Electronic Systems.

Diversification Opportunities for Medical Properties and Electronic Systems

0.26

Correlation Coefficient

Medical Properties  Electronic Systems

Modest diversification

The 3 months correlation between Medical and Electronic is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Medical Properties Trust and Electronic Systems Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Systems and Medical Properties 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 Medical Properties Trust are associated (or correlated) with Electronic Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Systems has no effect on the direction of Medical Properties i.e., Medical Properties and Electronic Systems go up and down completely randomly.

Pair Corralation between Medical Properties and Electronic Systems

Considering the 90-day investment horizon Medical Properties Trust is expected to generate 1.61 times more return on investment than Electronic Systems. However, Medical Properties is 1.61 times more volatile than Electronic Systems Technology. It trades about 0.09 of its potential returns per unit of risk. Electronic Systems Technology is currently generating about -0.09 per unit of risk. If you would invest  463.00  in Medical Properties Trust on March 2, 2024 and sell it today you would earn a total of  37.00  from holding Medical Properties Trust or generate 7.99% return on investment over 90 days.

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

Medical Properties Trust  vs.  Electronic Systems Technology

Medical Properties Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Properties Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Medical Properties showed solid returns over the last few months and may actually be approaching a breakup point.

Electronic Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electronic Systems Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Electronic Systems is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Medical Properties and Electronic Systems

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

The idea behind Medical Properties Trust and Electronic Systems Technology 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.