Correlation Between Global Medical and Redfin Corp

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

Diversification Opportunities for Global Medical and Redfin Corp

0.88

Correlation Coefficient

Global Medical  Redfin Corp

Very poor diversification

The 3 months correlation between Global and Redfin is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Global Medical REIT and Redfin Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redfin Corp 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 Redfin Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redfin Corp has no effect on the direction of Global Medical i.e., Global Medical and Redfin Corp go up and down completely randomly.

Pair Corralation between Global Medical and Redfin Corp

Given the investment horizon of 90 days Global Medical REIT is expected to generate 0.28 times more return on investment than Redfin Corp. However, Global Medical REIT is 3.59 times less risky than Redfin Corp. It trades about -0.24 of its potential returns per unit of risk. Redfin Corp is currently generating about -0.08 per unit of risk. If you would invest  896.00  in Global Medical REIT on September 26, 2024 and sell it today you would lose (109.00) from holding Global Medical REIT or give up 12.17% of portfolio value over 90 days.

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

Global Medical REIT  vs.  Redfin Corp

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

Redfin Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Redfin Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Global Medical and Redfin Corp

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

The idea behind Global Medical REIT and Redfin Corp 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.