Correlation Between Global Medical and Transcontinental

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

Diversification Opportunities for Global Medical and Transcontinental

-0.48

Correlation Coefficient

Global Medical  Transcontinental

Very good diversification

The 3 months correlation between Global and Transcontinental is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Global Medical REIT and Transcontinental Realty Invest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcontinental 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 Transcontinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcontinental Realty has no effect on the direction of Global Medical i.e., Global Medical and Transcontinental go up and down completely randomly.

Pair Corralation between Global Medical and Transcontinental

Given the investment horizon of 90 days Global Medical REIT is expected to under-perform the Transcontinental. But the stock apears to be less risky and, when comparing its historical volatility, Global Medical REIT is 1.83 times less risky than Transcontinental. The stock trades about -0.32 of its potential returns per unit of risk. The Transcontinental Realty Investors is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,885  in Transcontinental Realty Investors on October 4, 2024 and sell it today you would earn a total of  96.00  from holding Transcontinental Realty Investors or generate 3.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Global Medical REIT  vs.  Transcontinental Realty Invest

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.

Transcontinental Realty

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transcontinental Realty Investors are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental indicators, Transcontinental may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Global Medical and Transcontinental

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

The idea behind Global Medical REIT and Transcontinental Realty Investors 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.