Correlation Between Medical Properties and CareTrust REIT

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

Diversification Opportunities for Medical Properties and CareTrust REIT

0.51

Correlation Coefficient

Medical Properties  CareTrust REIT

Very weak diversification

The 3 months correlation between Medical and CareTrust is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Medical Properties Trust and CareTrust REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareTrust REIT 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 CareTrust REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareTrust REIT has no effect on the direction of Medical Properties i.e., Medical Properties and CareTrust REIT go up and down completely randomly.

Pair Corralation between Medical Properties and CareTrust REIT

Considering the 90-day investment horizon Medical Properties Trust is expected to under-perform the CareTrust REIT. In addition to that, Medical Properties is 3.17 times more volatile than CareTrust REIT. It trades about -0.03 of its total potential returns per unit of risk. CareTrust REIT is currently generating about 0.08 per unit of volatility. If you would invest  1,737  in CareTrust REIT on September 28, 2024 and sell it today you would earn a total of  1,002  from holding CareTrust REIT or generate 57.69% return on investment over 90 days.

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

Medical Properties Trust  vs.  CareTrust REIT

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 weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

CareTrust REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CareTrust REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Medical Properties and CareTrust REIT

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

The idea behind Medical Properties Trust and CareTrust REIT 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.