Correlation Between Global Medical and Green Brick

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

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

Diversification Opportunities for Global Medical and Green Brick

0.2

Correlation Coefficient

Global Medical  Green Brick

Modest diversification

The 3 months correlation between Global and Green is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Global Medical REIT and Green Brick Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Brick Partners and Global Medical 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 Medical REIT are associated (or correlated) with Green Brick. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Brick Partners has no effect on the direction of Global Medical i.e., Global Medical and Green Brick go up and down completely randomly.

Pair Corralation between Global Medical and Green Brick

Assuming the 90 days trading horizon Global Medical is expected to generate 2.08 times less return on investment than Green Brick. But when comparing it to its historical volatility, Global Medical REIT is 1.93 times less risky than Green Brick. It trades about 0.04 of its potential returns per unit of risk. Green Brick Partners is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,802  in Green Brick Partners on October 13, 2024 and sell it today you would earn a total of  508.00  from holding Green Brick Partners or generate 28.19% return on investment over 90 days.

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

Global Medical REIT  vs.  Green Brick Partners

Global Medical REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Medical REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Global Medical is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Green Brick Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Brick Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Green Brick is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Medical and Green Brick

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

The idea behind Global Medical REIT and Green Brick Partners 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.