Correlation Between Lumia and Medical Properties

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

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

Diversification Opportunities for Lumia and Medical Properties

-0.7

Correlation Coefficient

Lumia  Medical Properties

Excellent diversification

The 3 months correlation between Lumia and Medical is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Lumia 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 Lumia 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 Lumia 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 Lumia i.e., Lumia and Medical Properties go up and down completely randomly.

Pair Corralation between Lumia and Medical Properties

Assuming the 90 days trading horizon Lumia is expected to under-perform the Medical Properties. In addition to that, Lumia is 1.65 times more volatile than Medical Properties Trust. It trades about -0.32 of its total potential returns per unit of risk. Medical Properties Trust is currently generating about 0.26 per unit of volatility. If you would invest  358.00  in Medical Properties Trust on October 25, 2024 and sell it today you would earn a total of  58.00  from holding Medical Properties Trust or generate 16.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	80.95%
Values	Daily Returns

Lumia  vs.  Medical Properties Trust

Lumia

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lumia are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Lumia exhibited solid returns over the last few months and may actually be approaching a breakup point.

Medical Properties Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medical Properties Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Medical Properties is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lumia and Medical Properties

The main advantage of trading using opposite Lumia and Medical Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia 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 Lumia 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.