Correlation Between Hovnanian Enterprises and Global Medical

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

By analyzing existing cross correlation between Hovnanian Enterprises PFD and Global Medical REIT, you can compare the effects of market volatilities on Hovnanian Enterprises and Global Medical 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 Hovnanian Enterprises with a short position of Global Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hovnanian Enterprises and Global Medical.

Diversification Opportunities for Hovnanian Enterprises and Global Medical

-0.33

Correlation Coefficient

Hovnanian Enterprises  Global Medical

Very good diversification

The 3 months correlation between Hovnanian and Global is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Hovnanian Enterprises PFD and Global Medical REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Medical REIT and Hovnanian Enterprises 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 Hovnanian Enterprises PFD are associated (or correlated) with Global Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Medical REIT has no effect on the direction of Hovnanian Enterprises i.e., Hovnanian Enterprises and Global Medical go up and down completely randomly.

Pair Corralation between Hovnanian Enterprises and Global Medical

Assuming the 90 days horizon Hovnanian Enterprises is expected to generate 1.19 times less return on investment than Global Medical. But when comparing it to its historical volatility, Hovnanian Enterprises PFD is 1.43 times less risky than Global Medical. It trades about 0.06 of its potential returns per unit of risk. Global Medical REIT is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,384  in Global Medical REIT on September 22, 2024 and sell it today you would earn a total of  101.00  from holding Global Medical REIT or generate 4.24% return on investment over 90 days.

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

Hovnanian Enterprises PFD  vs.  Global Medical REIT

Hovnanian Enterprises PFD

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hovnanian Enterprises PFD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Hovnanian Enterprises is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Global Medical REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Medical REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Global Medical is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hovnanian Enterprises and Global Medical

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

The idea behind Hovnanian Enterprises PFD and Global Medical REIT 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.