Correlation Between Global Net and Medical Properties

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

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

Diversification Opportunities for Global Net and Medical Properties

0.8

Correlation Coefficient

Global Net  Medical Properties

Very poor diversification

The 3 months correlation between Global and Medical is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Global Net Lease and Medical Properties Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Properties Trust and Global Net 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 Global Net Lease are associated (or correlated) with Medical Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Properties Trust has no effect on the direction of Global Net i.e., Global Net and Medical Properties go up and down completely randomly.

Pair Corralation between Global Net and Medical Properties

Assuming the 90 days trading horizon Global Net Lease is expected to generate 0.53 times more return on investment than Medical Properties. However, Global Net Lease is 1.87 times less risky than Medical Properties. It trades about -0.19 of its potential returns per unit of risk. Medical Properties Trust is currently generating about -0.23 per unit of risk. If you would invest  854.00  in Global Net Lease on September 17, 2024 and sell it today you would lose (147.00) from holding Global Net Lease or give up 17.21% of portfolio value over 90 days.

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

Global Net Lease  vs.  Medical Properties Trust

Global Net Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Net Lease has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Global Net and Medical Properties

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

The idea behind Global Net Lease and Medical Properties 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.