Correlation Between CapitaLand Investment and Medical Properties

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

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

Diversification Opportunities for CapitaLand Investment and Medical Properties

-0.09

Correlation Coefficient

CapitaLand Investment  Medical Properties

Good diversification

The 3 months correlation between CapitaLand and Medical is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding CapitaLand Investment Limited 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 CapitaLand Investment 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 CapitaLand Investment Limited 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 CapitaLand Investment i.e., CapitaLand Investment and Medical Properties go up and down completely randomly.

Pair Corralation between CapitaLand Investment and Medical Properties

Assuming the 90 days horizon CapitaLand Investment is expected to generate 50.93 times less return on investment than Medical Properties. But when comparing it to its historical volatility, CapitaLand Investment Limited is 2.07 times less risky than Medical Properties. It trades about 0.01 of its potential returns per unit of risk. Medical Properties Trust is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  355.00  in Medical Properties Trust on December 22, 2024 and sell it today you would earn a total of  193.00  from holding Medical Properties Trust or generate 54.37% return on investment over 90 days.

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

CapitaLand Investment Limited  vs.  Medical Properties Trust

CapitaLand Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days CapitaLand Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CapitaLand Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Medical Properties Trust

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Properties Trust are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Medical Properties unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CapitaLand Investment and Medical Properties

The main advantage of trading using opposite CapitaLand Investment and Medical Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CapitaLand Investment 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 CapitaLand Investment Limited 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.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.