Correlation Between Global Medical and New England

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

Diversification Opportunities for Global Medical and New England

-0.46

Correlation Coefficient

Global Medical  New England

Very good diversification

The 3 months correlation between Global and New is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Global Medical REIT and New England Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New England Realty 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 New England. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New England Realty has no effect on the direction of Global Medical i.e., Global Medical and New England go up and down completely randomly.

Pair Corralation between Global Medical and New England

Given the investment horizon of 90 days Global Medical REIT is expected to under-perform the New England. But the stock apears to be less risky and, when comparing its historical volatility, Global Medical REIT is 2.59 times less risky than New England. The stock trades about -0.21 of its potential returns per unit of risk. The New England Realty is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,100  in New England Realty on October 4, 2024 and sell it today you would earn a total of  170.00  from holding New England Realty or generate 2.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	36.51%
Values	Daily Returns

Global Medical REIT  vs.  New England Realty

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 weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

New England Realty

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days New England Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very uncertain technical and fundamental indicators, New England may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Global Medical and New England

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

The idea behind Global Medical REIT and New England Realty 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.