Correlation Between Medical Properties and Welltower

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

Diversification Opportunities for Medical Properties and Welltower

-0.73

Correlation Coefficient

Medical Properties  Welltower

Pay attention - limited upside

The 3 months correlation between Medical and Welltower is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Medical Properties Trust and Welltower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welltower 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 Welltower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Welltower has no effect on the direction of Medical Properties i.e., Medical Properties and Welltower go up and down completely randomly.

Pair Corralation between Medical Properties and Welltower

Assuming the 90 days horizon Medical Properties Trust is expected to under-perform the Welltower. In addition to that, Medical Properties is 2.57 times more volatile than Welltower. It trades about -0.14 of its total potential returns per unit of risk. Welltower is currently generating about 0.05 per unit of volatility. If you would invest  11,345  in Welltower on September 24, 2024 and sell it today you would earn a total of  475.00  from holding Welltower or generate 4.19% return on investment over 90 days.

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

Medical Properties Trust  vs.  Welltower

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Welltower

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Welltower are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Welltower is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Medical Properties and Welltower

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

The idea behind Medical Properties Trust and Welltower 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.