Correlation Between Medical Properties and Procter Gamble

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

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

Diversification Opportunities for Medical Properties and Procter Gamble

-0.25

Correlation Coefficient

Medical Properties  Procter Gamble

Very good diversification

The 3 months correlation between Medical and Procter is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Medical Properties Trust, and The Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble and Medical Properties 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 Medical Properties Trust, are associated (or correlated) with Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble has no effect on the direction of Medical Properties i.e., Medical Properties and Procter Gamble go up and down completely randomly.

Pair Corralation between Medical Properties and Procter Gamble

Assuming the 90 days trading horizon Medical Properties Trust, is expected to generate 3.43 times more return on investment than Procter Gamble. However, Medical Properties is 3.43 times more volatile than The Procter Gamble. It trades about 0.17 of its potential returns per unit of risk. The Procter Gamble is currently generating about -0.13 per unit of risk. If you would invest  1,143  in Medical Properties Trust, on December 25, 2024 and sell it today you would earn a total of  629.00  from holding Medical Properties Trust, or generate 55.03% return on investment over 90 days.

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

Medical Properties Trust,  vs.  The Procter Gamble

Medical Properties Trust,

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Properties Trust, are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Medical Properties sustained solid returns over the last few months and may actually be approaching a breakup point.

Procter Gamble

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Procter Gamble has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Medical Properties and Procter Gamble

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

The idea behind Medical Properties Trust, and The Procter Gamble 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.