Correlation Between Arbor Realty and Medical Properties

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

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

Diversification Opportunities for Arbor Realty and Medical Properties

-0.69

Correlation Coefficient

Arbor Realty  Medical Properties

Excellent diversification

The 3 months correlation between Arbor and Medical is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Arbor Realty Trust 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 Arbor Realty 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 Arbor Realty Trust 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 Arbor Realty i.e., Arbor Realty and Medical Properties go up and down completely randomly.

Pair Corralation between Arbor Realty and Medical Properties

Considering the 90-day investment horizon Arbor Realty Trust is expected to under-perform the Medical Properties. But the stock apears to be less risky and, when comparing its historical volatility, Arbor Realty Trust is 1.48 times less risky than Medical Properties. The stock trades about -0.06 of its potential returns per unit of risk. The Medical Properties Trust is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  367.00  in Medical Properties Trust on December 28, 2024 and sell it today you would earn a total of  254.00  from holding Medical Properties Trust or generate 69.21% return on investment over 90 days.

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

Arbor Realty Trust  vs.  Medical Properties Trust

Arbor Realty Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arbor Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

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 21 (%) 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.

Pair Trading with Arbor Realty and Medical Properties

The main advantage of trading using opposite Arbor Realty and Medical Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arbor Realty 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 Arbor Realty Trust 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.