Correlation Between Welltower and Medical Properties

Can any of the company-specific risk be diversified away by investing in both Welltower and Medical Properties 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 Welltower and Medical Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Welltower and Medical Properties Trust, you can compare the effects of market volatilities on Welltower and Medical Properties 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 Welltower with a short position of Medical Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Welltower and Medical Properties.

Diversification Opportunities for Welltower and Medical Properties

0.76

Correlation Coefficient

Welltower  Medical Properties

Poor diversification

The 3 months correlation between Welltower and Medical is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Welltower and Medical Properties Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Properties Trust and Welltower 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 Welltower are associated (or correlated) with Medical Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Properties Trust has no effect on the direction of Welltower i.e., Welltower and Medical Properties go up and down completely randomly.

Pair Corralation between Welltower and Medical Properties

Assuming the 90 days horizon Welltower is expected to generate 2.86 times less return on investment than Medical Properties. But when comparing it to its historical volatility, Welltower is 2.44 times less risky than Medical Properties. It trades about 0.19 of its potential returns per unit of risk. Medical Properties Trust is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  350.00  in Medical Properties Trust on December 30, 2024 and sell it today you would earn a total of  217.00  from holding Medical Properties Trust or generate 62.0% return on investment over 90 days.

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

Welltower  vs.  Medical Properties Trust

Welltower

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Welltower are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Welltower reported solid returns over the last few months and may actually be approaching a breakup point.

Medical Properties Trust

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Properties Trust are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Medical Properties reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Welltower and Medical Properties

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

The idea behind Welltower and Medical Properties 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 CEOs Directory module to screen CEOs from public companies around the world.