Correlation Between Global Medical and Realty Income

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

Diversification Opportunities for Global Medical and Realty Income

0.95

Correlation Coefficient

Global Medical  Realty Income

Almost no diversification

The 3 months correlation between Global and Realty is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Global Medical REIT and Realty Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realty Income 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 Realty Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realty Income has no effect on the direction of Global Medical i.e., Global Medical and Realty Income go up and down completely randomly.

Pair Corralation between Global Medical and Realty Income

Given the investment horizon of 90 days Global Medical REIT is expected to generate 1.17 times more return on investment than Realty Income. However, Global Medical is 1.17 times more volatile than Realty Income. It trades about 0.16 of its potential returns per unit of risk. Realty Income is currently generating about 0.13 per unit of risk. If you would invest  743.00  in Global Medical REIT on December 27, 2024 and sell it today you would earn a total of  105.00  from holding Global Medical REIT or generate 14.13% return on investment over 90 days.

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

Global Medical REIT  vs.  Realty Income

Global Medical REIT

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Medical REIT are ranked lower than 12 (%) 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.

Realty Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Realty Income are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Realty Income may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Global Medical and Realty Income

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

The idea behind Global Medical REIT and Realty Income 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.