Correlation Between Medical Properties and Healthcare Realty

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

Diversification Opportunities for Medical Properties and Healthcare Realty

0.01
  Correlation Coefficient

Significant diversification

The 3 months correlation between Medical and Healthcare is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Medical Properties Trust and Healthcare Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare Realty Trust 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 Healthcare Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare Realty Trust has no effect on the direction of Medical Properties i.e., Medical Properties and Healthcare Realty go up and down completely randomly.

Pair Corralation between Medical Properties and Healthcare Realty

Considering the 90-day investment horizon Medical Properties Trust is expected to generate 2.55 times more return on investment than Healthcare Realty. However, Medical Properties is 2.55 times more volatile than Healthcare Realty Trust. It trades about 0.12 of its potential returns per unit of risk. Healthcare Realty Trust is currently generating about 0.03 per unit of risk. If you would invest  352.00  in Medical Properties Trust on February 12, 2024 and sell it today you would earn a total of  126.00  from holding Medical Properties Trust or generate 35.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Medical Properties Trust  vs.  Healthcare Realty Trust

 Performance 
       Timeline  
Medical Properties Trust 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Medical Properties Trust are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Medical Properties showed solid returns over the last few months and may actually be approaching a breakup point.
Healthcare Realty Trust 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Realty Trust are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Healthcare Realty is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Medical Properties and Healthcare Realty Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Medical Properties and Healthcare Realty

The main advantage of trading using opposite Medical Properties and Healthcare Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medical Properties position performs unexpectedly, Healthcare Realty 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 Healthcare Realty will offset losses from the drop in Healthcare Realty's long position.
The idea behind Medical Properties Trust and Healthcare Realty 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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