Correlation Between MP Materials and Healthpeak Properties

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

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

Diversification Opportunities for MP Materials and Healthpeak Properties

0.05

Correlation Coefficient

MP Materials  Healthpeak Properties

Significant diversification

The 3 months correlation between M2PM34 and Healthpeak is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding MP Materials Corp and Healthpeak Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthpeak Properties and MP Materials 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 MP Materials Corp are associated (or correlated) with Healthpeak Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthpeak Properties has no effect on the direction of MP Materials i.e., MP Materials and Healthpeak Properties go up and down completely randomly.

Pair Corralation between MP Materials and Healthpeak Properties

Assuming the 90 days trading horizon MP Materials Corp is expected to generate 3.04 times more return on investment than Healthpeak Properties. However, MP Materials is 3.04 times more volatile than Healthpeak Properties. It trades about 0.09 of its potential returns per unit of risk. Healthpeak Properties is currently generating about -0.02 per unit of risk. If you would invest  2,016  in MP Materials Corp on October 24, 2024 and sell it today you would earn a total of  465.00  from holding MP Materials Corp or generate 23.07% return on investment over 90 days.

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

MP Materials Corp  vs.  Healthpeak Properties

MP Materials Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MP Materials Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, MP Materials sustained solid returns over the last few months and may actually be approaching a breakup point.

Healthpeak Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Healthpeak Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Healthpeak Properties is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MP Materials and Healthpeak Properties

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

The idea behind MP Materials Corp and Healthpeak Properties 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.