Correlation Between Global Medical and NHPBP

Can any of the company-specific risk be diversified away by investing in both Global Medical and NHPBP 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 NHPBP 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 NHPBP, you can compare the effects of market volatilities on Global Medical and NHPBP 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 NHPBP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Medical and NHPBP.

Diversification Opportunities for Global Medical and NHPBP

0.37

Correlation Coefficient

Global Medical  NHPBP

Weak diversification

The 3 months correlation between Global and NHPBP is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Global Medical REIT and NHPBP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NHPBP 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 NHPBP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NHPBP has no effect on the direction of Global Medical i.e., Global Medical and NHPBP go up and down completely randomly.

Pair Corralation between Global Medical and NHPBP

Assuming the 90 days trading horizon Global Medical REIT is expected to generate 0.3 times more return on investment than NHPBP. However, Global Medical REIT is 3.36 times less risky than NHPBP. It trades about 0.05 of its potential returns per unit of risk. NHPBP is currently generating about -0.01 per unit of risk. If you would invest  2,126  in Global Medical REIT on October 26, 2024 and sell it today you would earn a total of  381.00  from holding Global Medical REIT or generate 17.92% 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.  NHPBP

Global Medical REIT

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Medical REIT are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

NHPBP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NHPBP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, NHPBP is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Global Medical and NHPBP

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

The idea behind Global Medical REIT and NHPBP 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.