Correlation Between MTI Wireless and Medical Properties

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

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

Diversification Opportunities for MTI Wireless and Medical Properties

0.64

Correlation Coefficient

MTI Wireless  Medical Properties

Poor diversification

The 3 months correlation between MTI and Medical is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding MTI Wireless Edge 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 MTI Wireless 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 MTI Wireless Edge 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 MTI Wireless i.e., MTI Wireless and Medical Properties go up and down completely randomly.

Pair Corralation between MTI Wireless and Medical Properties

Assuming the 90 days trading horizon MTI Wireless Edge is expected to under-perform the Medical Properties. But the stock apears to be less risky and, when comparing its historical volatility, MTI Wireless Edge is 1.64 times less risky than Medical Properties. The stock trades about -0.18 of its potential returns per unit of risk. The Medical Properties Trust is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  412.00  in Medical Properties Trust on September 17, 2024 and sell it today you would lose (18.00) from holding Medical Properties Trust or give up 4.37% of portfolio value over 90 days.

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

MTI Wireless Edge  vs.  Medical Properties Trust

MTI Wireless Edge

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with MTI Wireless and Medical Properties

The main advantage of trading using opposite MTI Wireless and Medical Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTI Wireless 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 MTI Wireless Edge 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.