Correlation Between Douglas Emmett and Global Medical

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

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

Diversification Opportunities for Douglas Emmett and Global Medical

-0.74

Correlation Coefficient

Douglas Emmett  Global Medical

Pay attention - limited upside

The 3 months correlation between Douglas and Global is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Emmett 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 Douglas Emmett 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 Douglas Emmett 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 Douglas Emmett i.e., Douglas Emmett and Global Medical go up and down completely randomly.

Pair Corralation between Douglas Emmett and Global Medical

Considering the 90-day investment horizon Douglas Emmett is expected to under-perform the Global Medical. In addition to that, Douglas Emmett is 1.59 times more volatile than Global Medical REIT. It trades about -0.07 of its total potential returns per unit of risk. Global Medical REIT is currently generating about 0.21 per unit of volatility. If you would invest  735.00  in Global Medical REIT on December 29, 2024 and sell it today you would earn a total of  139.00  from holding Global Medical REIT or generate 18.91% return on investment over 90 days.

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

Douglas Emmett  vs.  Global Medical REIT

Douglas Emmett

Risk-Adjusted Performance

Very Weak

Over the last 90 days Douglas Emmett has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Global Medical REIT

Risk-Adjusted Performance

Solid

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

Pair Trading with Douglas Emmett and Global Medical

The main advantage of trading using opposite Douglas Emmett and Global Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Douglas Emmett 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 Douglas Emmett 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.