Correlation Between Global Medical and Healthcare Realty

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

Diversification Opportunities for Global Medical and Healthcare Realty

0.23

Correlation Coefficient

Global Medical  Healthcare Realty

Modest diversification

The 3 months correlation between Global and Healthcare is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Global Medical REIT and Healthcare Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare Realty Trust 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 Healthcare Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare Realty Trust has no effect on the direction of Global Medical i.e., Global Medical and Healthcare Realty go up and down completely randomly.

Pair Corralation between Global Medical and Healthcare Realty

Given the investment horizon of 90 days Global Medical REIT is expected to under-perform the Healthcare Realty. But the stock apears to be less risky and, when comparing its historical volatility, Global Medical REIT is 1.15 times less risky than Healthcare Realty. The stock trades about -0.03 of its potential returns per unit of risk. The Healthcare Realty Trust is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,749  in Healthcare Realty Trust on August 30, 2024 and sell it today you would earn a total of  99.00  from holding Healthcare Realty Trust or generate 5.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Global Medical REIT  vs.  Healthcare Realty Trust

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. In spite of rather sound basic indicators, Global Medical is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Healthcare Realty Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Realty Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Healthcare Realty is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Global Medical and Healthcare Realty

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

The idea behind Global Medical REIT and Healthcare Realty 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.