Correlation Between Medical Properties and W P

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

Diversification Opportunities for Medical Properties and W P

0.82

Correlation Coefficient

Medical Properties  W P

Very poor diversification

The 3 months correlation between Medical and WPC is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Medical Properties Trust and W P Carey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on W P Carey 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 W P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of W P Carey has no effect on the direction of Medical Properties i.e., Medical Properties and W P go up and down completely randomly.

Pair Corralation between Medical Properties and W P

Considering the 90-day investment horizon Medical Properties Trust is expected to generate 4.29 times more return on investment than W P. However, Medical Properties is 4.29 times more volatile than W P Carey. It trades about 0.01 of its potential returns per unit of risk. W P Carey is currently generating about -0.05 per unit of risk. If you would invest  449.00  in Medical Properties Trust on August 31, 2024 and sell it today you would lose (16.00) from holding Medical Properties Trust or give up 3.56% of portfolio value over 90 days.

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

Medical Properties Trust  vs.  W P Carey

Medical Properties Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medical Properties Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Medical Properties is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

W P Carey

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days W P Carey has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, W P is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Medical Properties and W P

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

The idea behind Medical Properties Trust and W P Carey 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.